Last week’s crude oil technical analysis indicated that the price was on the verge of breaking its upward trendline. The 38% Fib line from last July’s high was a key reference point. Bears targeted the point of control line at $80, while bulls aimed to maintain control above $82 and eyed a move to $95.03 and eventually $100. To read the full article before continuing this week’s technicals, go here.
The trend line mentioned above was not able to hold this week as CL dropped and closed significantly below it. There is a strong support zone that price is finding a lot of buying pressure. This gives the bulls an opportunity for a long trade that has a fairly high risk-reward ratio and probability of success.
The long trade can be taken around current price levels ($83.47). The stop can be placed below the lows, while the first target can be placed around the peak of the recent relief rally seen on the daily chart. The second target is around the most recent high in the up trend, which is also at the 50% level on the Fib retracement.
The trade has a decent probability of success, but what is most attractive about it, is the high risk-reward ratio.
One more thing to look at is the hourly chart to show the bullish divergence and the bear trap that adds more confidence to the long trade. As long as price remains above $82, then the sentiment is bullish. If price drops below, we would need to re look at things again as prices could drop rapidly toward $77.95 which is the 23% Fib retracement level.
Let’s see how things play out for Friday’s sessions and then next week. We should also keep an eye on global events in the Middle East, especially as it could create huge volatility in CL in only a few seconds. Keep tight risk management rules always.
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