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Brent Oil Prediction this week February 17 to 23: the commodity may have started the bottoming process

By Rakesh Upadhyay

How can traders position themselves in Brent oil this week?

The International Energy Agency (IEA) expects a drop in global oil consumption in the first quarter of 2020 by 435,000 barrels per day (bpd), the first year-on-year decline in more than a decade. Previously, the agency had forecast the consumption to increase by 800,000 bpd over last year. The sharp revision on the downside is due to the coronavirus outbreak in China.

China is one of the major consumers of oil and it had accounted for about three-quarters of oil demand growth last year. The coronavirus outbreak has brought the Chinese economy to a screeching halt. The longer it takes for the epidemic to be contained, the larger will be the drag on crude oil demand. While the fundamentals paint a bleak picture, let’s analyse the Brent oil weekly chart to see the technical price prediction for the long term.

Brent oil price prediction chart: weekly

Brent oil plummeted below the $57 to $55.73 support zone in the week before. This was the first time this zone was breached in 2020. This shows that the bears are in command. However, the bears could not capitalise on the break and sink prices further towards the next support at $50.42. This is a positive sign as it shows that the bulls are accumulating at lower levels.

The relief rally of last week has pushed the price back above $55.73. In doing so, it has formed a bullish engulfing pattern on the weekly chart, which points to a possible trend reversal.

The absence of follow-through selling after breaking down of a critical support traps aggressive bears who are then forced to close their positions at higher levels. Hence, if the bulls can sustain the price above $57, the pullback can extend to $60.

Our view will be invalidated if the price turns down from the current levels and dips below $53.22. The Brent oil weekly chart is showing signs of a recovery. Let’s analyse the Brent oil daily chart to see if we find any reliable set-ups that can be purchased.

Brent oil prediction chart: daily

Though the past week started on a bearish note and Brent oil hit its lowest level year-to-date at $53.22 on Monday, the bears could not maintain the selling pressure. The price turned around on Tuesday, which shows demand at lower levels.

The relief rally has reached the 20-day EMA, which is likely to act as a stiff resistance. But if the bulls can carry the price above the 20-day EMA, the pullback can extend to $60 and above it to the 50-day SMA at $62.

Even if the price turns down from the current levels and finds support close to $55, it will indicate that a bottom is likely in place.

However, if the price turns down from the current levels and breaks below $55, a retest of the recent lows at $53.22 is possible. If this support cracks, Brent oil can plummet to the next critical support at $50.42.

How can the traders position themselves in Brent oil this week? Let’s find out.

Brent oil price prediction for February 17 to 23: how to trade it

Brent oil may show some weakness during the week. If the price rebounds off the $55 level, the traders can buy 50 per cent of their desired position size and keep the stop loss below the recent low. The rest of the position can be purchased after the price resumes its recovery above the 20-day EMA.

Long positions should be avoided if the price turns down from the current levels and breaks below $55.

FURTHER READING: Insurance firms in China implement blockchain to fast track coronavirus claims

FURTHER READING: What is the coronavirus and how could it affect stock markets?

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