Oil has been sold down quite hard from August highs giving back 17% in 13 trading days.

Wedge patterns are generally a sign of trend continuation when broken to the downside, and when found within bearish oil trend momentum, can become a potent pattern for lower lows. 

OilOil 

Key Points:

  • Daily Chart – Showcasing the major support and resistance levels
  • Price holding below the 200 EMA
  • Price holding below the 50 EMA
  • 5 wave wedge pattern completed
  • Price moving into APEX of wedge – Could see a small spew upside before the major drop.
  • Flag pattern for break out
  • RSI could break trend and range simultaneously for momentum

Key Levels:

Support – 36.40, 34.40

Resistance – 50 EMA, 37.75

Entry Zone:

Optimal entry provides the greatest reward to risk ratio while supporting entry is a zone for reversal signals.

Optimal Entry – 37.30

Supporting Entry – 37.00

Candle Reversals for entry

  • Bearish Shooting Star
  • Bearish Engulfing
  • Bearish Dark Cloud Cover

Bearish Candlesticks

The Risk:

As traders, it is your job to mitigate the risk and only trade structures that provide high probability and great reward to risk ratios.

If you are not comfortable with defined exit levels, experiment with Moving Averages to help set solid exit rules to protect your capital.

IF: Price breaks above 37.88 level and violates 50 EMA – this would suggest the structure is not in our favour and would be wise to reduce exposure or close the trade until a solid signal gives us reasons to re-enter.

Reward / Reward Targets:

Optimal Entry 37.30 – Target 1 34.40 = 5x Reward to Risk

Supporting Entry 37.00 – Target 1 34.40 =3x Reward to Risk