Technicals | May 04 2023
Bottom Line 03/05/23
Daily Trend: Down
Weekly Trend: Down
Monthly Trend: Down
Support Levels: $64.38 (June 2023 Contract)
Resistance Levels: $83.61 / $90.00 / $94.71
[All prices US$/bbl Nymex futures]
Technical Discussion
Reasons for caution:
→ bounce off capitulation low in April 2020 has stayed robust to this point
→ Green energy vs Fossil fuel battles globally becoming heavily politicized
→ Elliott Wave count remains complex yet potentially still looking for higher longer term
→ bullish pennant pattern has triggered yet we may now have a fake out on our hands
We have now rolled over onto the June 2023 contract. We’ve been very positive on this chart bigger picture for some time, especially with the pattern breakout that triggered on the 3rd of April. Yet last night we were served a savage blow which means we could well have a pattern fakeout on our hands now. A pretty brutal outcome if this ends up proving to be the case as we have previously been watching what we felt was a bullish pennant pattern unfolding since the beginning of 2022.
So previous to last night’s trading, what we witnessed was price retesting the breakout zone of the pattern combined with the gap being filled that was left open when the pattern broke out back in early April. All this was very acceptable and in fact, more than expected. Larger patterns when they break out more often than not retest their break-out zones for strength. The unfortunate thing here though is that no such strength has been witnessed on the retest. At least not to this point in time.
So with the move off the Wave-7 low now having retraced 61.8%, this is pretty much the maximum in relation to what we would like to see. The problem though is that last night’s trading presented to us a wide-ranging price bar that closed on its low combined with an increase in volume. So it has sellers written all over it. And to rub salt into the wounds, when you see price bars with these types of characteristics, it generally means that weakness will be forthcoming in the following session as a minimum. So if we do witness further weakness tonight on the open, we are going to need to witness a positive close on high volume to repair the damage that has been done here. Price is well oversold on the dailies now so let’s see where things sit on close early tomorrow morning!
Trading Strategy
Our levels have been adjusted for the June contract with our long position having triggered at $81.21 with stops now placed at $64.37. As mentioned price action was concerning last night and if further downside presents over the coming days, we may have a pattern fakeout on how hands which means we will need to take some defensive action on our stop position ASAP to reduce risk. Let’s see what tonight delivers!
[Note: Last night oil prices fell another -4% – Ed]
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