Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Chart Of The Day: Is Oil Heading To $100?

Published 18/01/2022, 15:32
Updated 02/09/2020, 07:05

Oil continued pushing higher today, extending its advance to the highest level for WTI since October 2014.

The energy commodity has been boosted by the increased likelihood of a supply disruption after "Yemen's Houthi group attacked the United Arab Emirates, escalating hostilities between the Iran-aligned group and a Saudi Arabian-led coalition," according to Reuters.

Analysts at Goldman Sachs have been forecasting for a while now that crude pricing could potentially hit $100, albeit not necessarily for geopolitical reasons. As for technical signals, at least for the short term, they are not as positive on the likelihood of a three-digit number on the horizon.

Oil Daily

Crude's price jumped today, creating a rising gap. Prices generally open much higher when there are only buyers, something that could therefore be considered bullish.

However, a gap up could also be the initial setup for a bearish move. A rising gap could be beaten back by bears, based on breaking headlines that change the overall oil demand picture, or via a concerted effort to push the price much lower, potentially creating a falling gap. Should this occur, the rise and fall could become an Evening Star, a bearish indicator signaling a trend could be about to reverse.

As it is, today's trading may form a hanging man instead which is also a bearish indicator. This would occur if prices close below today's opening price—also showing a bearish retaliation to a bullish failed attempt.

If prices track lower from this point, it would raise the odds of a massive top should they fall below today's low and head toward the mid $60s level.

Despite the price acceleration, the 50 DMA fell below the 100 DMA, demonstrating that the rate at which prices are escalating may still be slower than the previous ascent. While the RSI continues to point higher, it's already in overbought territory.

Moreover, the more sensitive momentum-based ROC indicator is curving lower in a negative divergence to today's price jump. Also, the ROC has reached a repeated resistance level since Oct. 4.

Trading Strategies

Conservative traders should wait for the hammer that's forming to be blown out before going long or for the potential top to complete before shorting.

Moderate traders would short upon the confirmation of the hanging man, with a close below the natural body of today's candle, if it closes as a hammer.

Aggressive traders could short in the proximity of resistance, allowing for generous risk-reward ratios.

Trade Sample – Aggressive Short

  • Entry: $85
  • Stop-Loss: $85.50
  • Risk: $0.50
  • Target: $83
  • Reward: $2
  • Risk-Reward Ratio: 1:4

Trade Sample – Moderate Short

  • Entry: $85 (upon retesting the confirmed hammer)
  • Stop-Loss: $86.00
  • Risk: $1
  • Target: $83.00
  • Reward: $2
  • Risk-Reward Ratio: 1:2

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.