We have been noting that crude oil is in a bullish looking pattern, but right up against resistance. Here is a clearer view of that situation. Resistance (red line) is also the neckline to the pattern. It’s very simple; a breakout that holds above 53 would target 75. If WTIC does not break out now but instead pulls back, the weekly EMA 30 would be a support area.
The monthly chart adds more perspective to the situation. The neckline is also a long-term trend line, which was broken in 2015. A rise above that measures to 75 as noted. That is also a 62% Fib retrace of the drop from 2014’s high to 2016’s low. Of course, if WTIC does take a big bounce, the 38% and 50% Fibs could be viewed as targets, but there is little resistance at those areas. What I like about the 62% Fib (76) is that it’s got heavy visual resistance and the pattern’s measurement working for it.
As for how to play it, I’ll leave that to you. There is USO, the under performing oil tracker. There are leveraged ETFs (also inaccurate and subject to natural price erosion over time), futures, options, etc. For me, I already played oil bullishly a few months ago by locking in low heating costs (pre-buying the season’s heating oil) for the first time in many years. Another way to play it is to buy the energy sector – if you’ve not already, as it was a long-term NFTRH+ highlight last year. That may well be the way I add additional exposure once I get a feel for a) oil’s neckline and b) the correction/consolidation in the stock market.
Using WTIC as the guide…
Buy: A break above the neckline and a hold of 53 or a pullback to the EMA 30, currently around 45.
Sell: 75 or anywhere lower that you’d like to take profit.
Stop Loss: Below 48 if buying for a breakout and below 40 if buying a pullback.
A reminder that chart based NFTRH+ updates are technical trade setup ideas, which may not be revisited as the buy, sell, stop parameters are already noted. They are meant as a starting point for further research if interested. I will not personally buy every item highlighted and will sometimes sell – without prior notice (because this takes time and resource away from NFTRH’s main functions) – any item that I do buy, below target, which is something I often do as a trader. Also please be aware that I am not a fundamental stock analyst. Due diligence is your responsibility.
