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