Medium term
Trade view / 19 August 2016 at 10:03 GMT

The crude oil rally looks exhausted

Trader / Saxo Capital Markets Pte Ltd
Instrument: CLV6
Price target:
Market price:

We have seen a tremendous surge in Light Sweet Crude Oil (CLc1 on SaxoTraderGO), as it heads for its biggest weekly gain since April. Crude has risen 23% over the last 13 trading days and has today encountered resistance at the 76.4% retracement, from the high on June 09 (51.67) to the low on August 03 (39.19):

Crude Fibo
Source : SaxoTraderGO

The trade view would be to sell crude oil based on the technical evidence:

1) Stochastics (10,3,3) bearish crossover in oversold region
2) Shooting star candlestick indicating exhaustion of the current uptrend
3) Death cross with 50-day simple moving average below the 100-day SMA
4) Possible wave 4 (bearish) in the Elliot Wave formation

Crude Technicals
 Source: SaxoTraderGO. Create your own charts with SaxoTraderGO click here to learn more

Crude Elliot
 Source : SaxoTraderGO


Entry:  Sell CLV6 (Light Sweet Crude Oil (WTI) – Oct 2016) @ market (48.7).

Stop: We base our stop on 1 x ATR, i.e. 48.7 + 1.55 = 50.25.

Target: 45.00, calculated as 1.618 times of wave 2, for a reward to risk ratio of 2.38.

— Edited by Clare MacCarthy

Non-independent investment research disclaimer applies. Read more
Armando_c Armando_c
You might underestimate the extreme speculative sentiment in the Oil market, this might very well go to 52-53 before a reversal.
John Roberti John Roberti
I believe Ole Hansen is right: we have experienced a huge covering of shorst that should be done now and all the fundamentals require a drop in the prices, particularly the situation in the US! I agree it will not really go higher than 51,50 on Brent or 49 on WTI
Edmund Liu Edmund Liu
Dear Armando, well you may be right, its anyone's guess how long the rally can be sustained. But it does seem like the rally is getting exhausted (based on the price action today) hence that's the basis for this trade view. We can wait till 52 or 53 to short but we may miss the turnaround completely if today is the turning point. Alternatively you may want to scale in the shorts at multi price levels, i.e. sell stop at 48.7, sell limit at 50 , sell limit at 52 , etc . Good luck!
Feders Feders
Hello!, I made a bear put spread 48/47,5, 24 days to expiration. Hopes goes well!
hikarihikki hikarihikki
Good call Edmund!
I think it was purely technicals and while sentiment was pretty bullish last week, I don't think this trade view was based on news/fundamentals. Cheers and good luck all!
Edmund Liu Edmund Liu
@Feders Thank you for sharing your trade idea, good luck
Edmund Liu Edmund Liu
@Hikarihikki Yes my trade views are purely technically driven. Hope it is going to turn out well for your trade


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