OIL close to possible trend reversal level

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May 26, 2014
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June 2, 2014

Oil prices have been trending upwards from early May after bottoming near 99$ and now trading above 104$. Oil price has been kept supported technically by the Ichimoku cloud and continued to trade within the upward sloping channel as shown in the 1 hour chart below. Oil price has now reached near the previous high of 105$ and resistance is strong in this area.

oil

Generally speaking, when a channel is broken the reversal is usually strong and at least moves towards the 38% retracement of the previous move. In this case, if the channel is broken downwards, I would expect a drop in price towards at least the 102,40$ level. Looking at a bigger time frame, we observe the triangle pattern being formed by Oil prices and how close to the upper triangle resistance Oil price is currently at. Trend remains up and price remains also above the Ichimoku cloud support. I expect the channel to be broken and the cloud support at 103$ to be challenged.

oil2

My target however is near the lower triangle boundaries as I believe we are going to see more of this sideways triangle movement. So I will turn bearish once the channel is broken and will get confirmation that we are heading towards the lower triangle support once price also breaks below the Ichimoku cloud.

oil3

If however Oil price manages to break above 105$, I would expect Oil price to move towards the larger triangle resistance boundaries near 109$. At current levels with Oil price just below the strong resistance of 105$ I’m neutral and would look for an opportunity to sell if short-term support at 103.50$ fails. If you want to see live my trades on OIL-GOLD and several FX pairs, become a member today for just 34.95$.

As always, thank you for taking the time to read my new post.

Alexandros Yfantis
Alexandros Yfantis
Fascinated by financial markets, studied International Securities Investment and Banking in the UK, works as a Portfolio Manager in Greece and runs a technical analysis website. Enjoys travelling and spending time with his family and preparing for the black belt in Korean Karate.