Short term
Trade view / 27 September 2016 at 5:17 GMT

Support in crude a launch pad for more upside

Instrument: OILUKDEC16
Price target:
Market price:

The price of oil (OILUKCont) made an important peak in June from where the price of oil has started to correct following the fierce advance off the lows set back in January.

The subsequent low in late July came in at an interesting point in time indicating that the corrective phase was over and that a new bull cycle had begun.

Looking at price levels, the peak at $53/barrel is about $1 off a 180 degree alignment with the late July lows, which is context could be considered to be close enough of an indication of a completed intermediate correction.

Looking at the current position of the price we have an important pivot at the $46/b level and the price has just barely managed to close below this once since the peak in on August 19.

As long as price can manage not to close below this level odds are we are looking for higher prices also in the short term.

Looking at the oscillators we can find an interesting bullish divergence on the Slow stochastic indicator (STOC-S) which is now trending higher.

The 200 Day Moving Average is also moving higher, the 50 DMA is flat but is trading above the 200 DMA. If it can manage to turn higher from here be in a bullish alignment with the longer term moving average. These indicators are all painting a bullish picture.

Support for the short term is found at $46/b, if this level is breached $43/b and $40/b are the next levels of support. To the upside we have $48/b, $51/b and $53/b.
Management and risk description

As long as OILUKCont traded above $46/b we are bullish in the short term and are looking for prices to move higher into resistance at $48/b, $51/b and $53/b.

The stop can be placed upon a daily close below $46/b. If one prefers a hard stop it could be placed just below $46/b at for example $45.50/b. 

The $48/b target is an intermediate level, a breach will signal it is time to move the stop higher as we are aiming for at least $51/b, a level at which one can start to take profits.

The risk to this setup mainly price spikes due to the Algiers meeting. One approach could also be to wait to see if the $46/b level can hold through the meeting hoping to get on board in the aftermath if risk/reward is still attractive.

Parameters OILUKDEC16

Entry: At market above $46/b.

Stop: Daily close below $46/b or hard stop $45.50/b.

Target: $51/b and $53/b.

Time horizon: One to two weeks.

OILUKCont daily chart
OILUKCont daily cart
OILUKCont daily development chart
Source: All charts, Saxo Trader - create charts with SaxoTrader; click here to learn more

— Edited by Adam Courtenay

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Non-independent investment research disclaimer applies. Read more


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