Early in NY, oil prices continued to fall during thin conditions on the Columbus holiday. After trading sideways for a month between the $44 and $50 range, price broke out higher and formed a bearish Butterfly pattern. Price is also to respecting both the 200- and 100-day Simple Moving Average(s).
Price action on the US oil daily chart highlights the key technical move. The bearish reversal pattern was targeted by the 161.8% Fibonacci expansion level of the X to A move and the 200.0% Fibonacci expansion level of the B to C move. If the slide continues major support will come from the heavily tested $44.00 level. If we continue to see a rebound across the board with commodity prices, we could see oil prices eventually target the $55 area.
If we see bearish momentum break the $44 level, major support may come from the psychological $40 handle. If the current consolidation range breaks above $57.50, further upside may target the $60.00 region.
The Trade: Buy US Oil at $45.75, with a stop loss at $43.75, and a take profit at $49.75. The Risk/Reward ratio is 1:2.