[FXWW777 is a professional trader based in New York city]
Commodity: Oil
Pattern: Inverse Head and Shoulders (Bullish)
Entry (Long): Buy stop above 33.73
Exit: 30.65
Target: 40.00
Technical Reasoning:
- Intermediate downtrend from the November highs around 50 have been broken with the breach and hold above 30. Primary downtrend remains intact as long as price remains below 37.
- Short term, however, hourly price action suggests a bullish consolidation is taking place while holding above the 30.80 lows and trend line mentioned below.
- With the hourly downtrend broken (which goes back to November of last year), you can begin to look for signs of a reversal. Detailed below, a cleanly defined inverse head and shoulders pattern is seen. Although the timeframe of the pattern is short, recent volatility suggests we may be getting close to a capitulation of short positions in spite of the recent protests regarding production cuts. I believe this short covering will be triggered on a close above 33.72.
- In terms of resistance, 32.27 and 33.72 look to the first and second obstacles for a sharp break higher. A break of $37 and daily close above points to a much more positive outlook going forward. In anticipation of the move higher, buying dips to 31/30.85 looks to be the prudent play with tight stops below 30.65.
You can view the charts in the full trade description.
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