WTI Crude has staged the greatest rally since the beginning of 2016, when crude oil doubled in just four months.
The daily chart below shows a 35% gain in less than five months from the low in June. The price recently sailed through the previous high set in January of this year at $55.24 and is revisiting levels not seen since mid 2015.
A fantastic run for bulls, but can this continue?
The weekly chart below shows the longer-term picture, showing the stunning collapse in the first half of the chart from just over $112 to a low of just over two years later at $26.05. Bulls want to know if this is just the start of the trend or just a bounce in a longer term bear trend.
The daily chart above certainly looks very positive with resistance of any major concern above. The price is well above any downward sloping trendlines and accelerating away from the longer term moving averages. The blue 100 day moving average has begun to turn higher and look set to cross over the 200 day moving average for a bullish signal in the days ahead. The 55 day moving average has already crossed above both these and is accelerating higher. We are even pushing above the outer boundaries of the Bollinger bands. Is there nothing to hold the bulls back?
As you know by now, I always warn it is very important to monitor the longer-term charts, no matter how much of a short term trader you are. Back to the weekly chart below you see the price approaching an important longer term 38.2% Fibonacci resistance at $58.97. Coupled with that is equally important downward sloping 200 week moving average, just starting to dip below this Fibonacci level.
This is the most important area of resistance, as we crossed back above the 23.6% Fibonacci level and 100 day moving average at $46.20/46.40. In severely overbought conditions on both the daily and weekly charts, there is an obvious risk of a peak to the 22 month recovery. Just above at that $59 level meets the upward sloping 17 month trendline (from June 2016) at around $60.50.
Bulls will need to break through this level to remain in full control of the price, and then tackle the (less important) 2015 year high at $62.58.
If you are a WTI Crude bear looking for a low risk selling opportunity, it could be worth trying shorts in the $59-$60 area with a stop above that 2015 year high. There is great profit potential on a short position if we reject those resistance levels, with a move back below the January high at $55.24, signalling further weakness. We should then target the mid-$53 area before testing the September high at $52.86, but there is certainly room to move as far as strong support in the $47-$46 area.
This article was provided by Jason Sen, founder of Day Trade Ideas. Jason is a 30 year trading veteran that began trading on the LIFFE Exchange floor back in the 80's. Since then he has gone onto become a prominent Forex, Futures, and Options analyst for many of the major banks, hedge funds, prop firms, and retail traders. His analysis and articles are viewed by thousands every single day, and help them make better trading decisions. You can get in touch with Jason through the following methods.
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