US Oil to Break Triangle Pattern Under 79.68
US
Oil
(WTI) continues to break down from its high established on May 29th at $114.80 a barrel. Since this point, we have seen a five month $39.12 a barrel sell off. This
down trend
has been seen consolidating through September and recently breaking lower after a test of
resistance
of our trend line at $90.49. As the move continues, trend traders will have many opportunities to join in with their preferred directional bias.
Fundamentally,
oil
prices
are still tied to the ongoing global
economic crisis
. As we see economies slow, demand for oil will slow as well, driving prices down. This week’s
economic calendar
gave us decreasing US Durable Goods Orders and European Industrial Confidence numbers. Both sets of negative data lead us to believe that our trend has the potential to continue.
Price Action
Taking price in to a 4Hour chart we can see a potential
breakout
of a recently created symmetrical triangle. Price action is currently testing the support line found at $81.35 and attempting to break the previous low of $79.68 from September 28th. Lower lows will suggest that our
trend
is prepared to challenge prices under support and move to test the daily low of $75.68 from August 9th.
Trading O
pportunity
My preference is to sell US Oil on a breakout of our 4H trend line under $79.50.
Stops
should be placed at $82.60.
Limits
will look for a minimum decrease of $6.00 a barrel to target $72.50, giving us a 1:2 risk reward ratio.
Alternative scenarios include price failing to break support leading to a re-test of our trend line.
Additional Resources
Trading the Euro Zone Debt Crisis
How to Trade Symmetrical Triangles
How to Trade US Jobs Report
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