Chart Of The Day: Brent Fundamentals Should Propel Price Higher

Chart Of The Day: Brent Fundamentals Should Propel Price Higher

Investing.com  | Sep 16, 2019 13:28

Brent futures soared 13.6%, or $8.20, at today's open, to reach $68.50, after a series of drone attacks disabled half of Saudi’s oil production, reducing the global supply by 5%. Exacerbating the impact of the lower supply on price, a heated exchange between the U.S. and Iran has also amplified the threat of military action.

However, the price has since trimmed its advance to 9.4%. As the fundamentals and the geopolitical risks haven't changed, the deceleration is probably due to profit-taking following the contract’s highest jump since its launch in 1988.

Indeed, Brent's paring of its biggest leap on record may prove an opportune buying dip, as the retreat appears to be based purely on technical trading. Given that Saudi Arabia's oil production is expected to be well below capacity for weeks, the price is likely to return to rallies. A military escalation in the region would only quicken and sharpen such a price move.

Technical analysis supports this view, as the chart below demonstrates.

Brent Oil Futures Daily Chart

The price gapped well above the downtrend line since late April, posting a new high above the July 11 peak of $67.65, from the Aug. 7 bottom, establishing a short-term uptrend.

In the medium-term, the trend remains sideways, with falling highs since October amid rising lows since December. The price temporarily crossed above the medium-term downtrend line, but then fell back below it. A new high above the April 25, $75.60 peak is required for a medium-term uptrend.

Note, the price paring found support where the August highs met with the June-July lows (dotted line).

Trading Strategies

Conservative traders would wait for the medium-term to settle a trajectory before committing to a position.

Moderate traders may go long in the short-term after confirmation of support.

Aggressive traders may enter a long position according to their account’s risk.

Trade Sample

  • Entry: $65
  • Stop-Loss: $64 – below the top of the prior ascending August resistance (dotted line).
  • Risk: $1
  • Target: $68, below today’s highs
  • Reward: $3
  • Risk:Reward Ratio: 1:3
  • Investing.com

    Related Articles

    Latest comments

    Add a Comment
    Please wait a minute before you try to comment again.
    Richard Ekpokeme
    Richard Ekpokeme

    goodevening sir sir is it good to buy or sell now  ... (Read More)

    Sep 16, 2019 18:53 GMT· Reply
    Discussion
    Write a reply...
    Please wait a minute before you try to comment again.

    Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
    Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
    Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
    It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
    Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

    English (USA) English (India) English (Canada) English (Australia) English (South Africa) English (Philippines) English (Nigeria) Deutsch Español (España) Español (México) Français Italiano Nederlands Português (Portugal) Polski Português (Brasil) Русский Türkçe ‏العربية‏ Ελληνικά Svenska Suomi עברית 日本語 한국어 中文 香港 Bahasa Indonesia Bahasa Melayu ไทย Tiếng Việt हिंदी
    Sign out
    Are you sure you want to sign out?
    NoYes
    CancelYes
    Saving Changes

    +