US Oil Trade Update – April ’19

*US Oil Market Breakdown and Analysis*

A lot of you might remember a previous blog post analysing the US Oil Commodity chart. It turns out that the bullish run on Oil was not yet over at that point and I took a fairly swift loss on my short positions last month which is no real drama. Losses are a part of trading and I cover this in another post relating to trading Oil and taking losses. If you have a good Reward:Risk ratio and fairly decent win rate then you will be able to overcome losses.

In my opinion, US Oil is now at an even better resistance level and with the over extended bullish run taking the price of a barrel from around $42 up to $64.50, there is now even more downside potential. So lets look at the current higher timeframe weekly price chart for WTI Crude Oil which is the one I use for analysis on the TradingView platform.

For those that don’t know, when I talk of US Oil I am talking about the WTI or West Texas Intermediate Crude Oil.

Technical Analysis:

US Oil Weekly Timeframe Chart

The analysis is much the same as my last article but the price per barrel has climbed another $5. Price is now approaching and rejecting the bottom of the weekly price channel that was broken last year and which then led to the high move to the downside.

This current zone is now very interesting to me because we also now have a previous weekly support zone here at around $64.50 per barrel and price has rejected this zone multiple times on the lower timeframe which you will see in the next chart. This new resistance zone is providing a new “ceiling” to price.

Last weeks candle also closed below the weekly 0.618 Fibonacci Retracement level with a lovely wick test of this zone and the daily channel trendline it was retesting. These are 3 nice confluences for an upcoming short position.

US Oil 4 Hour Timeframe Chart

On the lower 4hr timeframe chart it is clearer to see the current resistance level holding price back on multiple occasions over the past 7 days. More importantly price is now making subtle lower lows (and lower highs) on the 4hr timeframe so there is a good probability of the next move being bearish.

Currently price is riding above all EMA’s from the 4 hour timeframe up to the monthly timeframe so entering at the moment is still fairly high risk considering the momentum. That being said, I am a fan of selling high and buying low and I would certainly not entertain the idea of entering long positions at this level because the bullish run is definitely over extended.

A break below the 4 hour EMA would be a very good sign that we could see a decline in the price of a barrel of US Oil.

Fundamental Analysis/News:

Demand for US Oil by China has been increasing recently and that is one of the reasons why the price per barrel has been pushing up steadily for the past few weeks. China is the worlds second largest user of US Oil. In simple terms, as demand increases so does price.

Another factor to the recent increase in the price of both WTI and Brent Crude Oil is the deal between OPEC (Organization of the Petroleum Exporting Countries ) and its allies which has lead to them limiting their production by 1.2 million barrels.

However, in my opinion there is a high chance of this production limit being removed when they next meet in June 2019. Supply can then increase and the price of US Oil should begin to fall. There are already talks of the possibility of Russia bringing an end to the deal.

How I plan to enter short positions:

My first option for entry would be on the 4hr timeframe if the 50 EMA is finally broken and fresh lower lows are made. I would then look to enter on the next lower high and a retest of the 4hr 50 EMA because it would then be acting as a dynamic resistance instead of supporting price like it has been over recent months.

This entry is shown on the chart below.

US Oil 4 Hour Chart – Short Entry Option 1

My second option for entering short positions would be a lot more conservative. Quite simply I would wait for a second weekly candlestick close below the weekly 0.618 Fibonacci retracement level and $64.50 resistance zone.

Two weekly rejections would be a strong sign that the price of US Oil has hit its limit and any further upside is not likely.

US Oil Weekly Chart – Short Entry Option 2

As always, I will post my actual entry on my profile on the TradingView platform and if you don’t already use it then I highly recommend you take a look.

If you use the link below you may be able to secure a discount on a full access subscription to the platform!

DISCLAIMER: None of the information posted on this site is to be considered investment/financial advice. Trading is high risk and you should only trade with money you can afford to lose.

1 thought on “US Oil Trade Update – April ’19

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