Fundamentals
WTI crude futures rose 1.56% to $70.92 per barrel late Tuesday as fears of oil supply disruptions grew after Iran launched ballistic missiles at Israel.
Iran fired over 180 missiles in retaliation for Israel’s campaign against Hezbollah in Lebanon, escalating tensions in the oil-rich region. ANZ Research noted Iran’s involvement raises concerns about potential supply disruptions, as the country is a key OPEC member, with output reaching a six-year high of 3.7 million barrels per day in August.
The U.N. Security Council will address the conflict today (Wednesday 02 October).
Technical Analysis
Support Zone (Highlighted in Green Box):
- There is a clearly defined support level around $66 – $71. This region has been tested multiple times, especially in mid-2023 and now in the latter part of 2024, and has consistently provided a floor for prices.
Downtrend Line:
- A descending trendline has formed from the peak in early 2023, acting as a strong resistance. This trendline has been tested on multiple occasions, but the price has been unable to break above it.
- The intersection of the price and this trendline, combined with the 100-week EMA (Exponential Moving Average), is a critical resistance level near the $78-$80 region.
Volume:
- The recent volume bar (green) accompanying the latest bounce from support is relatively high at 1.079M. This is a positive sign for bulls but is also only due to last night’s unfortunate conflicts.
Trade Setups:
Long Trade Ideas:
- Breakout Trade:
- Entry: On a confirmed breakout above $78.04 (above the downtrend line and 100-week EMA).
- Target 1: $85, near previous highs and psychological resistance.
- Target 2: $90, if momentum is strong, aiming for a full retracement to the highs of early 2023.
- Stop Loss: Just below the 100-week EMA ($77.50) to limit downside risk if the breakout fails.
- Support Rebound Trade:
- Entry: Near $71-$72, if prices retest the support zone again and show signs of holding.
- Target 1: $75, immediate resistance from the last swing high.
- Target 2: $78, aligning with the trendline and EMA.
- Stop Loss: Below $66, which is the low of the current support zone. This provides a clear exit if the support fails.
Additional Notes
The bullish target may seem optimistic now, but if the conflicts continue and intensify, then these targets are more than possible.
