Technicals | Jul 18 2018
Bottom Line 17/07/18
Daily Trend: Down
Weekly Trend: Neutral
Monthly Trend: Up
Support Levels: 63.08 / 60.00 / 57.81 (new contract)
Resistance Levels: 75.27 / 76.90 / 83.93 / 85.05
Technical Discussion
Crude Oil prices were belted lower Monday night via a triple whammy ! Firstly there was talk of a potential release of Oil from global supplies. Secondly data from the IMF showed a slowdown in global economic growth. And thirdly the potential for the U.S putting waivers on Iran Oil sanctions has also recently come to the fore. All three individually, let along in combination, would have the effect of increasing supply substantially, and the market last night reacted accordingly with Crude Oil prices dropping by over 4%. Watching 60.00 support very closely from here.
Reasons to be positive above 60.00:
→ OPEC continues to apply production cuts yet sustaining this is now a concern
→ supply / demand potentially starting to balance yet reporting needs more consistency
→ price action continuing to be productive bigger picture yet more proof needed
→ the potential for a major low to be locked in is now very real
→ Geopolitical factors especially in relation to Trade Wars remain a concern
We checked in on the weekly chart last time with the standout pattern being the complex reverse head & shoulders which is already looking to have bullish potential, be it the more solid trigger point from here is above [US$/bbl] 85.05. If this can be achieved then we see no reason why post such a trigger, the 110.00 – 130.00 price zone could not be achieved. Naturally enough this is a more medium to longer term prognosis, and does depend on the pattern triggering in the first place.
Weakness has reentered the fray recently and this will simply be defined as healthy so long as old resistance now acting as support circa 60.00 can continue to hold strong from here. Any break below here though will have 57.81 in its sights, then below here all bullish bets will be off the table as pattern structures will weaken considerably. This 60.00 price zone is also around the 50.0% retracement of the most recent run north off the mid 2017 lows.
So combined with support and the 200 day moving average, this is the price point we are going to be keeping a very close eye on from here, as technically this zone should have the ability to bring out of the woodwork some fresh buying. For now our daily divergence indicator is heading back to oversold with strong bearish divergence on the weeklies. The latter suggests further downside is still going to be required over the coming weeks, with further medium term churning expected from there before we can potentially look forward to another lift in prices. So a minor red flag below 60.00, with the firm bullish trigger coming in above 85.05.
Trading Strategy
Whilst price stays above 60.00 we are going to view this immediate pullback as being healthy in nature only. Anything below 60.00 though will be concerning so this is the price point where major decisions are going to be made from. There are no low risk set ups right here though, so trading this big high risk contract is well and truly off the table for the moment.
Re-published with permission of the publisher. www.thechartist.com.au All copyright remains with the publisher. The above views expressed are not by association FNArena's (see our disclaimer).
Risk Disclosure Statement
THE RISK OF LOSS IN TRADING SECURITIES AND LEVERAGED INSTRUMENTS I.E. DERIVATIVES, SUCH AS FUTURES, OPTIONS AND CONTRACTS FOR DIFFERENCE CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CAREFULLY CONSIDER YOUR OBJECTIVES, FINANCIAL SITUATION, NEEDS AND ANY OTHER RELEVANT PERSONAL CIRCUMSTANCES TO DETERMINE WHETHER SUCH TRADING IS SUITABLE FOR YOU. THE HIGH DEGREE OF LEVERAGE THAT IS OFTEN OBTAINABLE IN FUTURES, OPTIONS AND CONTRACTS FOR DIFFERENCE TRADING CAN WORK AGAINST YOU AS WELL AS FOR YOU. THE USE OF LEVERAGE CAN LEAD TO LARGE LOSSES AS WELL AS GAINS. THIS BRIEF STATEMENT CANNOT DISCLOSE ALL OF THE RISKS AND OTHER SIGNIFICANT ASPECTS OF SECURITIES AND DERIVATIVES MARKETS. THEREFORE, YOU SHOULD CONSULT YOUR FINANCIAL ADVISOR OR ACCOUNTANT TO DETERMINE WHETHER TRADING IN SECURITES AND DERIVATIVES PRODUCTS IS APPROPRIATE FOR YOU IN LIGHT OF YOUR FINANCIAL CIRCUMSTANCES.
Technical limitations If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.
Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.
