Oil Rally Stalls at Resistance

In my previous post on oil I wrote about bearish triangle that could be seen on 1, 2 and 4 hour charts. On the one hand it failed to materialize when price rallied through upper trend line of 45.50-46.00 (I took a small loss on that one). On the other hand, that does not negate the fact that the commodity is still in a downtrend and may resume its long term direction any time. You may look at 8 hour chart below and you will see that for the third time price rallied to 200 ema on 8 hour chart and each time a bearish pin candle pattern formed causing price to stall and then to fall. 

The same thing happened today. You can see an indecision candle first, and then two bearish candles, the second one being the signal for a short trade and if you had taken it (I surely did) you would have made nice cash by now. I entered my short at 46.49 with a stop loss above the high of the current move (47.72) and I took my profit at 45.20. Risk reward ratio on that was 1:1, but as the pattern was really strongly bearish and easily took the trade without thinking much about it. 

Support remains as it was at 43.50-43.00 area. I do expect it to be broken soon and price to reach another new low for the year. In my opinion oil is headed towards 30 and then possibly to 20. I play it only from the short side for the time being. 

Oil Hit Upper Trend Line

I mentioned in my earlier post that a possible bearish triangle was in formation in oil. Looks like my predictions are confirmed as today price hit upper trend line of the triangle and is reversing to the downside at the time of writing. As you may see from the chart below we have pressure building up for the commodity to go down. Any time it rallies up, it faces resistance earlier than previous time. So, the first point was 49.30, followed by 48.40, then 46.40, later 46.00 and now 45.60. Let me remind you that breakout traders would sell a break of key support that currently is 43.50-43.00 area. 

If breakout materializes we may see the security to go down as low as 37.50 (the low of August 24). I do have a small short position from 43.16 with a stop loss above today’s high. Let’s remember that the longer term trend is still down and a resumption of the direction may start any time now. FOMC rate decision tomorrow can surely be a good trigger for the continuation of the downtrend. Anyway, any bearish candle on the hourly chart at resistance could be a good point for entering a short position. Let’s wait and see what happens to the commodity. 

Oil in Range for the Second Week

As has been said earlier oil was expected to stay in a range for some time. There were obvious signs of a failed rally upwards that ended with the commodity reaching 49 level. It has been two weeks of ranging now. From technical point of view you can see a bearish triangle in development with the support being at 43.50 level and resistance with descending trend line at 46.00-46.50 area. There is a possibility of a false break above current resistance and a rally to 47.00-47.50 area, but in my opinion, price will likely stall at 46.50.

We should also remember that narrowing range is always followed by sharp increase of volatility and breakouts and prolonged moves. That’s precisely what I expect from the commodity. Sometime in the next couple of weeks the security should break through 43.50-43.00 level. A less likely scenario would be the commodity running above 46 level to 49 resistance and then going beyond that to 54-55 resistance. 

Anyway, if we have a rally towards 46.00-46.50 I would wait for some bearish signs (railroad tracks, bearish pin, M pattern and etc.) at the top to go short. At the moment I have no intentions of buying the security.