Oil Price Talking Points:
- Oil prices have spent much of the past two weeks recovering after sellers were re-buffed at seven-month-lows.
- WTI crude oil prices have pushed back for a re-test of trendline resistance and this helped to stall the bullish advance last week: Is another bearish turn around-the-corner in oil prices?
- DailyFX Forecasts are published on a variety of markets such as Gold, the US Dollar or the Euro and are available from the DailyFX Trading Guides page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.
Crude Oil Stabilizes Above 55, Runs into Trendline Resistance
WTI crude oil prices have spent the past two weeks trading higher after re-testing a key support zone on August 7th. That support was the same zone of prices that helped to arrest the April-May sell-off following a 24% decline; and its now held two bearish trends that threatened to break-below the psychological 50-handle.
At this stage, that support bounce has extended and last week brought in a key level of resistance around 57.34, which is confluent with a bearish trend-line taken from late-July swing-highs. That trendline has come back into play after buyers were able to cauterize support above the 54-handle.
WTI Crude Oil Four-Hour Price Chart
Can Support Hold a Third Test?
The support zone that runs from 50.54-51.64 has now been tested twice in the past three months and each time a vigorous bounce has shown. But – each of those bounces have so far led to a series of lower-highs as shown by the bearish trendline, indicating a waning effort from buyers to defend this spot on the chart.
The big question is whether this zone could hold a third test? Below current price action is a key spot on the chart that’s held multiple bounces over the past three years around the 42.50 level. This could function on short-side breakout targets should the 50-level get encroached upon again, with closer target potential existing around 47.50 and 45 on the way down for a test of three-year-lows.
WTI Crude Oil Eight-Hour Price Chart
Crude Oil Near-Term Strategy
Given the recent spate of strength combined with the longer-term bearish theme, and crude oil could be approached in either direction at the moment.
For those looking at the bullish side of oil prices, focusing on a hold of support above the 55-level could keep the door open for short-term bullish strategies. Price action over the past week has continued to exhibit a series of higher-highs and higher-lows, and this could be worked with on a very short-term basis to look for a re-test of the 57.34 level that came into play last week.
WTI Crude Oil Hourly Price Chart
On the other side of oil prices, short-side strategies could remain workable, as well, largely under the assumption that resistance at last week’s high holds. This could open the door to two different approaches, with the more aggressive being short-side strategies with stops above this morning’s high, above the bearish trend-line, looking for a push back to 55. Alternatively, for traders that would like to move forward a bit less aggressively, waiting for the turn to actually start, as denoted by a test below 55, could re-open the door to bearish strategies and the wider stop could be justified with initial targets around the 53.05 level on the chart.
WTI Crude Oil Four-Hour Price Chart
To read more:
Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts have a section for each major currency, and we also offer a plethora of resources on Gold or USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.
Forex Trading Resources
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— Written by James Stanley, Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX