Crude Oil Unable to Stage Rally

Crude oil unable to stage a rally
.19 Apr 2024
author avatar image Andreas Thalassinos

Table of Contents

Briefing – Crude Oil Unable to Stage Rally

  • Title: Crude Oil Unable to Stage Rally
  • Financial instrument: Crude Oil
  • Timeframe: Daily
  • Session: London
  • Trend: Down
  • Trend Confirmation: Linear Weighted Moving Average(LWMA),
  • Momentum: MACD below its Signal line
  • Divergence: Not available
  • Support Levels: 81.528, 81.155, 80.306
  • Resistance Levels: 84.203, 85.954, 87.251
  • Trading Strategy: Sell on Breakouts, Sell on Rallies

High Impact Economic Events

  • Tuesday, 07:15 am (GMT+0): French Flash Manufacturing PMI (EUR)
  • Tuesday, 07:15 am (GMT+0): French Flash Services PMI (EUR)
  • Tuesday, 07:30 am (GMT+0): German Flash Manufacturing PMI (EUR)
  • Tuesday, 07:30 am (GMT+0): German Flash Services PMI (EUR)
  • Tuesday, 08:30 am (GMT+0): Flash Manufacturing PMI (GBP)
  • Tuesday, 08:30 am (GMT+0): Flash Services PMI (GBP)
  • Tuesday, 01:45 pm (GMT+0): Flash Manufacturing PMI (USD)
  • Tuesday, 01:45 pm (GMT+0): Flash Services PMI (USD)

Trend AnalysisĀ 

Crude oil price chart on daily timeframe showing a decline with potential support and resistance levels.

The price of Crude Oil has exhibited a significant downward move since April 5. After reaching a daily high of 87.813 US Dollars per barrel, the price rebounded to form a technical reversal to the downside, commonly referred to as a failure swing. This reversal pattern was followed by a series of lower highs, which paved the way for a downward trajectory. During this period, the bears pushed the price lower to 81.528. Thursday’s close completed a Hammer candlestick reversal pattern, rebounding from the session’s low and the Lower Bollinger Band

This recent price action suggests a bullish momentum in the market with a possible sideways direction underway. These developments indicate that further decline may be in store for Crude Oil.  

Indicators and Oscillators Analysis 

The Relative Strength Index (RSI) fell below the 70 extreme levels, indicating a possible sideways direction or decline for the commodity. However, traders should exercise caution, as RSI alone may not be a reliable indicator. Additionally, the Bollinger Bands suggest tightening volatility as the Upper and Lower Bands started to converge. At the same time, the Middle Band served as immediate resistance to the upside correction. The Linear Weighted Moving Average and the Moving Average Convergence/Divergence (MACD) Signal LIne also confirm the downward movement. In particular, prices are trading below the Moving Average line, and MACD is below the zero Signal Line. Additionally, the Stochastics crossed above the extreme oversold, in the neutral zone. On the other hand, the MACD oscillator indicates a bullish bias. 

Key Support Levels 

In the current market scenario, the bears hold the reins of Crude Oil, and the price of the commodity will likely continue to decline. The initial support level is seen at 81.528, and a further decline may lead to a breach of this level. If t this happens, the next support level at 81.155 could come into play. The violation of this level may indicate further potential for a downturn, and the next significant support level is estimated to be 80.306. It is crucial to closely watch these support levels to gauge Crude Oil’s future direction.

S1–>81.528

S2–>81.155

S3–>80.306

Key Resistance Levels 

If the bulls manage to take control of the market, a potential correction to the upside may yield gains in the future. However, resistance is likely to arise at various levels. The initial resistance level is estimated to be approximately 84.203; subsequently, resistance is projected to be witnessed at 85.954 and 87.251, respectively. These levels of resistance could pose a challenge to the market’s upward momentum. Nonetheless, with careful consideration of market trends and strict risk management tools, it is possible to navigate these obstacles and mitigate risks.

R1–> 84.203

R2–> 85.954

R3–> 87.251

Trading Strategy for Crude Oil

Based on the technical analysis, traders may consider adding to their positions above the recent high of 81.428, which was marked on April 18. On the other hand, aggressive traders may explore short-term buying opportunities on dips toward the Middle Band, with tight stop-loss orders to manage risk effectively.  Additionally, if the bearish momentum persists and candlesticks continue to close below the Lower Bollinger Band, indicating a continuation of the downtrend, traders may take advantage of the declining prices with short positions.

Conclusion

In conclusion, the technical analysis of Crude Oil suggests a bearish outlook that may continue as downward momentum persists. On the other hand, a possible pause for a sideways market is on the table amid geopolitical tensions. Traders should closely monitor price action around key support and resistance zones and relevant technical indicators to identify potential trading opportunities and manage risk effectively in the current market environment. 

author avatar image
Andreas Thalassinos

Experienced educator with a demonstrated history of working in the financial services industry. Skilled in Technical Analysis, Market Risk, Asset Management, Stock Market, and Trading Systems. Strong professional with a MSTA by Society of Technical Analysts (UK), CFTe and MFTA focused in Master of Financial Technical Analysis from International Federation of Technical Analysts (USA).