Today’s Trading Edge: Oil prices stabilizes but downward momentum appears poised to return

WWM US OIL DEC 18 2014

My last oil post explained that crude oil is poised for further downside as oversupply and falling demand seem to be firmly in place as the global economy weakens.

The US oil daily chart above displays the recent plunge that easily touched the $55 level after price declined below the psychological $60 handle.     Price action on the 60-minute oil chart is displaying some signs of a bullish rebound with higher lows, but not has so far failed to make higher highs.  If we do see a bounce higher to $61.25, a bearish butterfly pattern may form.

With the strong macro short argument remains in place, an eventually move towards $50.50 could occur once downward momentum returns.  Price will need to make a lower low and take out $55.30 before reentering a short position.

The trade: Sell US Oil at $55.20 with a stop loss at $57.20 and a take profit at $50.50  The Risk/Reward Ratio is almost 2:5

Edward J. Moya

Technical Strategist

Edward J. Moya is the Chief Market Strategist for edmoya.com, an educational website for foreign exchange and commodity traders. He has over 15 years of investment industry experience in forex, stocks, options and futures. At edmoya.com, Mr. Moya writes daily currency and commodity analysis and has authored numerous articles on trading using both technical and fundamental analysis for major financial publications. He is a contributor of technical and fundamental analysis in currencies and commodities to SFO, Market News International, and Forex Factory.

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