Crude Oil Price Analysis: Moving towards an exhaustion level
Selling close to the 261.8% extension with a downside target of 24.60 offers a sound reward against risk setup
Market highlights from the last week
Monday 11 May: Crude rallied ahead of the New York open following comments from Saudi Arabia that it would cut output by a further 1m bpd in June
Tuesday 12 May: API data recorded a US inventory build of 7.6m barrels compared with expectations of 4.3m which dampened sentiment, but gasoline stocks declined
Wednesday 13 May: Oil prices failed to capitalise on an inventory draw amid concerns over contract volatility
Thursday 14 May: The International Energy Agency (IEA) stated that demand is a little stronger than expected and production is likely to decline to nine-year lows, but the overall market position was still very difficult
Friday 15 May: Oil prices strengthened on Friday with further optimism that global demand would start to recover despite the very weak US retail sales report
Crude Oil Price Analysis
Let us have a look at the technical viewpoint:
Monthly: Four months of net losses resulting in Crude Oil trading to a base of $9.97 per barrel on the 21 April. Price action for the month resulted in a Doji Style candle being posted from the low. Upward pressure can be noted this month. A monthly close above 32.50 would leave a Morning Doji Star pattern and would be bullish for long-term sentiment.
Weekly: Three weeks of net gains. Resistance is seen at 32.60
Daily: 261.8% extension level is located at 34.96 (from 9.97-19.47). This is close to the previous high of 32.21. From an Elliott wave perspective, this could be the completion of a 5-wave count. This could/should be followed by a 3-wave correction.
Daily 2: Using a projected channel to locate a possible downside target. Support comes in at 24.60
Outlook: We look for further buying to be limited. Selling close to the 261.8% extension with a downside target of 24.60 offers a sound reward against risk setup. It should be noted this is regarded as counter-trend
Possible trade setup
Action: Selling at 34.80
Potential return on risk to first target: R4.9 (reward 9.80 / risk 2.00)
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