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 rallies but price stalls on 4 hour chart

Oil has recovered slightly from its most recent slump. On the 24^th of August the commodity hit its low for the year and rallied upwards throughout previous week. You may see three waves up on the chart, which means the security, may be due for a correction or a fall back to previous lows. In any case, the most logical thing to happen now is some consolidation at the level or a topping process and then a move down in waves. 

You may also spot 200 sma and ema on 4 hour chart and price stalling when it hit the indicator. I assume a lot of traders have taken their profits off the table when the price touched the indicators. 

Of course, another rally of 5 bucks is possible. In that case we would see 50 or 51 in US oil. I tend to think we would probably end closer to 50.50, because the level marks previous support of consolidation on the way down. 

Anyway, we need to wait and see how the market performs on Monday and Tuesday to see whether a move up or down is more likely. 

Long term trend: down

Intermediate trend: down

Short term trend: up

Oil is approaching resistance

Oil (US) has been consolidating and correcting. It is currently running to important intra-day resistance level of 40.50. It coincides with 200 sma on hourly chart and also the high of August 24. There might be a false breakout of the area (very likely) and a reversal back to 38.50 or even the low of the year 37.75. 

As the commodity is in a clear downtrend only short positions should be opened. There are much higher chances to make profitable trades trading in the direction of prevailing move than trying to capture counter trend moves. 

Of course, the lower the security drops the sharper rallies upwards it will produce. I will only consider it buying after I see it fail to make new lows for a prolonged period of time. This would be a sign that the downtrend might be over and the commodity is being accumulated. For the time being such signs are not there and only sell positions should be considered. 

Next levels of resistance if the above mentioned is broken: 41.50, 42.00 and 42.50.

Key fundamental data today is: US Gross Domestic Product and US Core Personal Consumption both to be released at: 12:30 GMT. 

US Oil 1 hour chart

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