Oil coiling into bearish flat below 200 and 50 EMA for potential downside continuation.

Oil

Oil – The pattern confirmation requires a solid candle close below the flag for entry with a stop loss trigger above the flag.

A secondary option (optimal entry) provides greater reward to risk ratio at the 200 EMA following a rejection candle for entry with a stop above $40.30.

 

Key Points:

  • Price behaviour at the 200 EMA is crucial for execution so going down to the 15-minute time frame may provide an entry signal in the form of a bearish candle reversal. (See below)
  • Price holding below the 200 EMA
  • Price holding below the 50 EMA
  • 21 EMA has crossed below the 50 and 200 EMA
  • Flag pattern for break out
  • Price found support at the 50% Fibonacci retracement (October low – Oct high)

 

Key Levels:

Support – $38.70, $37.00

Resistance – 50 EMA, 200 EMA, $40.30

 

Entry Zone:

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

Optimal Entry – $39.90

Supporting Entry – Flag break out

 

Candle Reversals for entry

  • Bearish Shooting Star
  • Bearish Engulfing
  • Bearish Dark Cloud CoverBearish 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 $40.59 level and violates 200 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 $39.90 – Target 1 $38.70 = 1.5x Reward to Risk

Optimal Entry $39.90 – Target 2 $37.00 = 4x Reward to Risk