Trading position (short-term, my opinion; levels for crude oil’s continuous futures contract): long positions with entry at $68.50-69.00, with $65.50 as a stop-loss and $73.00 as the initial price target.
Crude oil price is breaking below its last week’s lows today, affected by the weekend’s OPEC oil output increase news along with the strengthening dollar and stock market correction. On Tuesday, black gold reached a local high of $75.52. However, today the price broke firmly below the $70 price level. Is this a medium-term topping pattern or still just a profit-taking action following the months-long rally?
Is This Oil Breakdown Still a Correction?
Today oil is trading much lower, below $70, as the market has broken below its technical support level of $70-72. For now, it still looks like a correction within a medium-term uptrend. Oil price is getting closer to its mid-May local highs, as we can see on the daily chart (the graph includes today’s intraday data):
Oil Remains Below Medium-Term Upward Trend Line
Crude oil has broken above its pre-Covid price levels recently – the market has come back from last year’s historical plunge in April. Since May we have seen an acceleration of the uptrend, but the recent decline may be seen as a negative medium-term signal.
The weekly chart of the Light Crude Oil Continuous Contract is also showing clearly negative technical divergences between the price and the indicators (chart by courtesy of http://stockcharts.com)
Conclusion
Crude oil broke below its month-long consolidation this morning, as it got below the $70 price mark. For now, it looks like a correction within a medium-term uptrend. The market is likely to bottom as it gets closer to the mid-May local highs along the $67 level. Therefore, speculative long positions are justified from the risk/reward point of view.
As always, we’ll keep you, our subscribers, well-informed.
Trading position (short-term, my opinion; levels for crude oil’s continuous futures contract): long positions with entry at $68.50-69.00, with $65.50 as a stop-loss and $73.00 as the initial price target.
Thank you.
Paul Rejczak,
Oil Trading Strategist
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