Oil runs to 41.50 and falls

Black gold, aka oil is in one of the strongest downtrends of all time. The collapse started at the end of last June and it is still continuing. Some say it may go down as low as 30 $ per barrel, others even claim that it will be 20 $ by the end of the year. A lot of oil producing and exporting countries are positioning themselves for lower income and planning their budgets accordingly. 

What do traders do? Well, they trade in the direction of the prevailing trend. Despite the fact, oil is not at the best spot where you can take a long term short, from position of a short term trader I can say that you can simply wait for a rally and then place a short. Such a situation happened yesterday when price rallied above previous day’s high, formed a reversal structure and collapse. 

A similar situation is happening now. Price rallies above Asian session high during US session, formed a peak, tried to break it one time and reversed by forming a classical reversal pattern M. 

A short simply had to be placed when 13:45 (GMT) 15 minute candle closed. A stop has to be around 41.55 (just above today’s high). Let’s see how this short plays out. 

Reversal pattern in US oil

US dollar recoups losses against British Pound

Post news reaction has faded and gbp/usd is retracing after briefly going over 1.5700 level. You may actually see a reversal pattern on 15 minute chart. It is often called an M pattern, which indicates that the move up is stalling and a reversal is taking place. It is most effective if the second top does not reach previous one and the pattern itself does not last longer than 2 hours. In this case it was around 2 hours. 

The selling signal occurred when 12:30 GMT (15 minute) candle closed. You would have opened a short around 1.5689 level (depending on your broker spreads) with a stop loss order at 1.5720. It might be a little bit too big for a day trade, but remember that you can always move your stop when the trade starts working in your favor. 

Take profit could be around 1.5660-1.5650  (50 percent retracement from the peak). Price is slowly approaching the level. At this point one can actually move stop at break even. 

After today’s move we can state that bullish bias has gotten stronger and Pound may finally overcome 1.5700 level tomorrow or by the end of the week. I am waiting for the pair to dip to buy it.

Reversal pattern M on 15 minute chart