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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

Crude Oil Price AnalysisDaily: 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. 

Crude Oil Price AnalysisDaily 2: Using a projected channel to locate a possible downside target. Support comes in at 24.60

Crude Oil Price AnalysisOutlook: 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

Stop: 36.80

Targets: 25.00

Potential return on risk to first target:  R4.9 (reward 9.80 / risk 2.00)

US Crude Oil Spot
Daily change
33.05
Low: 31.47
High: 34.03

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