Technicals | May 08 2019
Bottom Line 07/05/19
Daily Trend: Down
Weekly Trend: Neutral
Monthly Trend: Neutral
Support Levels: 55.75 – 54.52 / 42.36 – 42.05
Resistance Levels: 66.60 / 74.36 / 78.57
Technical Discussion
In recent times Iranian sanctions have been all the news and likely influencing Crude Oil's gradual rise. Yet another provocative situation has been bubbling away in nearby Turkey. Over the past few days Turkey has sent it's Faith drilling ship into Cypriot waters. This has prompted a stern response from the U.S, combined with a Greek Cypriot counter threat. The EU has also recently issued their own warnings to Turkey as well. Their ship is presently in a Cypriot exclusive economic zone (EEZ) with no signs of withdrawing to this point. The area is rich in Oil and Gas. Geopolitical issues have always been catalysts for stronger Oil prices. So when combined with a robust technical picture, which we will discuss further below, the potential for a perfect storm to be brewing here becomes very real.
Reasons to be positive above [US$/bbl] 55.00 – 56.00:
→ supply / demand equation remains in balance
→ price action continuing to be productive bigger picture
→ the potential for a major low to be locked in remains very real
→ Geopolitical factors always remain in the spotlight
Price action has a number of things going for it at the moment. Firstly is the reverse head and shoulders pattern that has continued to prove since the neckline was broken above back in February. It's target has yet to be attained just below the 70.00 mark, yet right at this juncture we see no reason why it wont be over the shorter term time frames. From an Elliott Wave perspective we have labelled the move off the late December 2018 lows as being impulsive to the upside. With a Wave-(iii) recently locked in at 66.60. The swing that took shape to tag this level was hit with some Type-A bearish divergence. Yet the good news is that the symmetrical a-b-c move south that followed post the trigger , has now fully unwound this indicator back to oversold. Price has broken back above the 200 day moving average recently, and last night we witnessed a strong key outside reversal right on the 200 day moving average retest. So in our view this was a very positive session with buyers coming in strongly on the intraday dip which temporarily tagged 5 week lows. We would have liked to have seen some stronger volume with this, yet overall price action is continuing to show signs that it is more than comfortable continuing to trend higher. Lowering volume on the minor pullback has been textbook, even more so if we can start to see volume gradually start to rise over the coming weeks, with price maintaining it's upward trajectory. So basis our analysis we continue to see scope for higher. Yet if price does swing north yet again from here, then we need to be aware that the move will be labelled as a 5th wave, with a reasonable breather expected once it completes. For now though this price chart continues to look the goods.
Trading Strategy
We remain long at 55.97 with stops in profit at 58.20. As mentioned in regards to our Elliott wave count, if we have a shallow wave-(iv) in play right here, then another swing higher over the coming weeks will not be out of the question. Potentially seeing price head towards pattern target just below $70.00 or perhaps even a little higher. Our stop is tight enough so lets see if it can hang in there, which will allow us to partake in yet another swing to the upside over the coming weeks.
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