Here Are 3 Things You Need To Know “Technically” about the High and Low Oil Price
Brent crude oil prices rose steadily for months and surged more than 72% over the last one year-climbed to 14- years high of $139 per barrel. After fluctuating wildly the price per barrel of Brent oil appreciated more than 33% since Russia invaded Ukraine on February 24 and eventually fell dramatically to about 30% from the peaks to give up all the gains and touched the lows of $96.90 per barrel.
Later on, prices retreated up again to $107.80 per barrel levels. Traders fretted over the fragile moves and markets are thrown completely out of whack. In the midst of geopolitical drama and fears of supply disruptions, there's just no certainty about where oil prices are heading. In order to correctly understand the ongoing price tussles and manage your risk timely,
Here are 3 important things you need to know technically about the fragile oil price moves:
1-Trend channel
Long term trend channel clearly depicts the prices moving within the ascending trend channel and touches the peaks and bottoms of the channel in the last several times, except on a few occasions where prices overshoot the supply area. The current channel displays prospective supply and demand areas. A simple approach can be to sell longs when prices hits the upper boundary of the channel and buy when they touch back to the downward range. Currently, prices are moving in the middle of the trend channel, and suggest to stay cautious and do nothing.
2-Moving Average Crossovers
A moving averages crossovers (dead or golden) provides signals when a trend is about to reverse (bearish or bullish) and it happens when two or more moving averages cross each other. Despite the fact that this approach doesn’t predict future direction, is laggard and slightly delayed depending upon the time frame we’re analyzing, but still it can be a very effective tool to use as a price confirmation signal for smoothing prices and understanding the ongoing trend reversals. It can be used to determine stop-loss levels. At present, we’ve got dead-cross signals after the sharp decline from the peaks.
3- Patterns/Polarity
One of the most authentic price patterns to determine bullish reversal is the Head & Shoulder Pattern. It comprises the Left Shoulder, Head, Right Shoulder & Neckline, where the neckline can be upward, downward, and horizontal. This pattern generates breakout signals when prices break the neckline, and one notable point is that, this neckline can act as a key actionable point in making money. The neckline can display as a polarity level-support becomes resistance & resistance becomes support. Moreover, this neckline can act as stop-loss or stop-buy point. You can gauge where prices are heading by calculating the height of the head. Calculate the difference between head peak and neckline and subtract this from the neckline level, you’ll get your target price. Currently, the pattern has broken the neckline and confirms a bearish trend and prices reacted to this signal and dropped down to the low of $96.90.Recent pullback from the lows may take it back to the level of the neckline.
Currently, we assume the pullback from the lows may stretch the current moves up to the neckline level, which may act as resistance (polarity). If prices surpass neckline levels then we need to work alternatively.
It is important to practice these techniques regularly and apply them on different time frames to exactly pinpoint your entry and exit points. Remember, risk management is the key and you need to rightly place your stop loss or stop buy orders.
In future posts I will further explain when and how to apply stop loss and stop buy orders using trend channel, moving averages crossovers, and Head & Shoulder techniques.
Happy Trading :)
Ehtesham Khan, CMT, CFTe
Chartered Market Technician
CEO | EK Global Capital
Brent crude oil prices rose steadily for months and surged more than 72% over the last one year-climbed to 14- years high of $139 per barrel. After fluctuating wildly the price per barrel of Brent oil appreciated more than 33% since Russia invaded Ukraine on February 24 and eventually fell dramatically to about 30% from the peaks to give up all the gains and touched the lows of $96.90 per barrel.
Later on, prices retreated up again to $107.80 per barrel levels. Traders fretted over the fragile moves and markets are thrown completely out of whack. In the midst of geopolitical drama and fears of supply disruptions, there's just no certainty about where oil prices are heading. In order to correctly understand the ongoing price tussles and manage your risk timely,
Here are 3 important things you need to know technically about the fragile oil price moves:
1-Trend channel
Long term trend channel clearly depicts the prices moving within the ascending trend channel and touches the peaks and bottoms of the channel in the last several times, except on a few occasions where prices overshoot the supply area. The current channel displays prospective supply and demand areas. A simple approach can be to sell longs when prices hits the upper boundary of the channel and buy when they touch back to the downward range. Currently, prices are moving in the middle of the trend channel, and suggest to stay cautious and do nothing.
2-Moving Average Crossovers
A moving averages crossovers (dead or golden) provides signals when a trend is about to reverse (bearish or bullish) and it happens when two or more moving averages cross each other. Despite the fact that this approach doesn’t predict future direction, is laggard and slightly delayed depending upon the time frame we’re analyzing, but still it can be a very effective tool to use as a price confirmation signal for smoothing prices and understanding the ongoing trend reversals. It can be used to determine stop-loss levels. At present, we’ve got dead-cross signals after the sharp decline from the peaks.
3- Patterns/Polarity
One of the most authentic price patterns to determine bullish reversal is the Head & Shoulder Pattern. It comprises the Left Shoulder, Head, Right Shoulder & Neckline, where the neckline can be upward, downward, and horizontal. This pattern generates breakout signals when prices break the neckline, and one notable point is that, this neckline can act as a key actionable point in making money. The neckline can display as a polarity level-support becomes resistance & resistance becomes support. Moreover, this neckline can act as stop-loss or stop-buy point. You can gauge where prices are heading by calculating the height of the head. Calculate the difference between head peak and neckline and subtract this from the neckline level, you’ll get your target price. Currently, the pattern has broken the neckline and confirms a bearish trend and prices reacted to this signal and dropped down to the low of $96.90.Recent pullback from the lows may take it back to the level of the neckline.
Currently, we assume the pullback from the lows may stretch the current moves up to the neckline level, which may act as resistance (polarity). If prices surpass neckline levels then we need to work alternatively.
It is important to practice these techniques regularly and apply them on different time frames to exactly pinpoint your entry and exit points. Remember, risk management is the key and you need to rightly place your stop loss or stop buy orders.
In future posts I will further explain when and how to apply stop loss and stop buy orders using trend channel, moving averages crossovers, and Head & Shoulder techniques.
Happy Trading :)
Ehtesham Khan, CMT, CFTe
Chartered Market Technician
CEO | EK Global Capital
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