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. 

2 Bearish Pins in Oil on 4 Hour Chart

Strong rally in oil seems to have exhausted its initial momentum as price is stalling at 49 level. This is confirmed by price action on 4 hour chart. On the 31^st of August the first bearish pin candle pattern formed indicating increase of bearish pressure and strong selling (might be profit taking of the longs too) and the second bearish pin formed on the 1^st of September (both around 49 level). We do not want to jump to fast conclusions, but we may have a top in the commodity and a resumption of a downtrend any time now. Selling rallies becomes the best option for trading again.

 

Our bearish bias is also confirmed by 8 hour chart where price hit 200 ema and retraced. Current support is at 44 level and we expect price to stay between 49 and 44 levels for some time. Key support is now around 39-38 levels. 43-42 levels are less important support levels, but they should hold price collapse for the time being. They coincide with 200 sma and ema on 1 and 2 hour charts.  

Intra-day resistance is at 45.50 followed by 46.00 and finally 47.00. Momentum seems to have changed and shorts are favored now over longs.  

Pound is Still Falling against US dollar

Despite the fact that gbp/usd move down got slower, it is still going south. It seemed that there was going to be a reversal today. Why? If you look at 15 minute chart you can clearly see that Monday low did not exceed Friday low. It actually resembled a double bottom pattern. However, during European session today the lows was taken out and new low was made. Yesterday lowest point was at 1.5340 while Friday low stood at 1.5335. Now American session is in full swing and the lowest level today is 1.5304. The fall may continue further.

The best play for such market is, of course, selling rallies. Such an opportunity presented itself right on the London open. Three arrows on the chart indicate a reversal, which shows that counter trend rally is over and price is about to move down again. It is also obvious that 200 ema acted perfectly as a resistance level on 15 minute chart. Just look at those candle pins to see for yourself. 

Neither data from UK, nor from US could stop cable from collapsing. Well, more important news is coming at 14:00 GMT when ISM Manufacturing from US is released. Trade only from the short side till you definitely see a trend change.

Downtrend in gbpusd May be Over

After falling the whole week, gbp/usd may be turning around this week and go up. If the pair fails to break Friday low, we may wait a few pushes up this week. There are two levels of support down. The first one is Sunday open low which was made in the first 15 minutes on the open and then cable rallied and formed a high of 1.5436, which failed to be broken on Frankfurt open. Pound briefly went below Asian low 1.5399 by one pip before running sharply upwards. We can still expect a retracement to 1.5380 level, which I expect to hold. The next level of support is Friday low: 1.5335. 

Resistance is today’s high (Frankfurt open high) at 1.5437 (200 ema and sma are blocking the way upwards), followed by 1.5490 (same indicators on 30 minute chart) and 1.5508 (the high of 27^th of August). 

There is no key fundamental news today that might affect exchange rate of the pair. Tomorrow will see: GBP Net Consumer Credit, Net Lending Sec. on Dwellings, Mortgage Approvals and most importantly Markit UK PMI Manufacturing SA all coming at 08:30 GMT. 

Key data from United States will be: USD ISM Manufacturing coming at: 14:00 GMT.