Technical Analysis

Bull Target Hit On Crude Oil Futures!

Introduction

In our earlier analysis, I mentioned key levels in CL crude futures, focusing on a support zone between $66-$71 and a potential breakout above $78.04. There was an expectation of a rally towards higher targets if the price successfully broke above the descending trendline and the 100-week EMA. With escalating geopolitical tensions involving Iran and Israel, bullish momentum was supported by concerns over oil supply disruptions.

CL futures daily chart with target hit on a trade from oneup trader

Key Updates Based on the Chart (October 9, 2024):

  1. Bull Target Reached ($78.04):
    As predicted in the previous analysis, CL has hit the initial bull target of $78.04. This level aligns with both the 100-week EMA and the descending trendline from early 2023, which were acting as strong resistance areas.
  2. Short-term Pullback:
    After touching the target level, the price has pulled back slightly to around $75.30, which is expected after hitting major resistance. The market is showing a natural consolidation before potentially deciding the next move.
  3. Support Zone ($66-$71):
    The previously identified support zone around $66-$71 remains intact. As you can see from the chart, this zone has continued to provide a floor for the price action and could once again act as a crucial level if the market faces renewed selling pressure.
  • The descending trendline remains a strong resistance and we must keep an eye on it.
  • The 100-week EMA at $74.89 is still providing dynamic resistance/support. Currently, the price is trading just below it, and the next few sessions will be critical to see if it holds its bearish resistance.

Trade Opportunities

1. Short-term Bearish Setup (Potential Correction):
Given the pullback after reaching the bull target and the current RSI showing signs of exhaustion, there is potential for a short-term bearish setup.

  • Entry: A short position around $75.30-$75.50 with confirmation of rejection near the 100-week EMA.
  • Target 1: The first target could be the support at $71.50-$72.
  • Target 2: If the price breaks lower, the final target could be in the $68 range, which aligns with the lower part of the support zone.
  • Stop Loss: A stop just above $78.50 to manage risk if the bulls regain control.

2. Bullish Rebound from Support (Medium-term Setup):
If the price revisits the support zone around $71-$72, this could present a prime buying opportunity.

  • Entry: Long near $71-$72 if the price shows support holding with bullish candlestick patterns.
  • Target 1: Immediate resistance at $75.
  • Target 2: $78, coinciding with the trendline resistance.
  • Stop Loss: Below $66, to protect against further downside.

3. Breakout Trade (Long-term Bullish Setup):
A confirmed breakout above the $78.04 level would signal strong bullish momentum for further upside potential.

  • Entry: Long on a break and close above $78.04.
  • Target 1: Next target at $85, based on the psychological resistance and previous high.
  • Target 2: Full retracement towards $90 if geopolitical tensions intensify.
  • Stop Loss: Below $77.50 to avoid a false breakout scenario.

Additional Considerations:

  • Geopolitical Risk Premium: Ongoing tensions between Israel and Iran could continue to provide bullish tailwinds to crude oil prices. If the conflict escalates further, supply disruptions could push prices even higher.
  • Fundamental News: Keep an eye on OPEC’s production stance and global economic data, which can significantly affect crude oil demand and supply dynamics.

Final Note

If you would like to learn more about our beginner trading course, please do so below.