Breaking News
Get 45% Off 0
Investors lost 37% by missing this ONE signal 😵
Read now

Chart Of The Day: Oil Selloff Fueled By Fundamentals; Technicals Aren't As Clear

By Investing.com (Pinchas Cohen)CommoditiesNov 18, 2021 09:32
ca.investing.com/analysis/chart-of-the-day-oil-selloff-fueled-by-fundamentals-technicals-arent-as-clear-200493589
Chart Of The Day: Oil Selloff Fueled By Fundamentals; Technicals Aren't As Clear
By Investing.com (Pinchas Cohen)   |  Nov 18, 2021 09:32
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
CL
-0.06%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

Oil prices plunged out of the gate on Thursday, with the commodity opening lower, extending the current decline for a third day.

The panicked selloff was triggered by a report that, not only was US President Joseph Biden considering tapping into the country's emergency reserves in order to lower prices, he was also "asking large consuming nations to consider a stockpile release"  to further cool overheated prices. The Reuters report said the President had approached countries like China and Japan—among the world's biggest oil consumers—asking them to participate.

Does that mean now is a good time to go short oil futures? Technicals aren't providing decisive signals.

Oil Daily
Oil Daily

WTI may have completed an H&S top, signaled by the price action as the trend reverses. We're not sure there's any significance however, to the Nov. 4 low that deviated from the pattern. Perhaps, it was a fakeout a bear trap.

The commodity's price fell below the 50 DMA for the first time since Sept. 10, increasing the odds of momentum weighing on oil toward the 100 DMA below $75, a critical psychological price level.

However, while all the indicators already provided a signal in October that the price could be heading lower, this still may not be the best time to short.

Even if prices are slipping, it won't occur in a straight line. They generally swing in a pendulum that moves from trader greed to fear, creating ebbs and flows within every trend, including one that's falling.

Case in point: the price neared the bottom of a falling channel and has come off its lows, forming a hammer (pending a close). That means the price could rebound in a return move to retest the bearish pattern.

Trading Strategies

Conservative traders should wait for the price to retest the neckline of the H&S and find resistance.

Moderate traders would wait for the same bounce for a better entry if not for confirmation.

Aggressive traders could enter a contrarian long trade, going long on a presumed rebound, before joining the rest of the market on the way down along with the trend. Money management is vital. Here's an example of what a basic trade plan should include:

Trade Sample – Contrararian Long Position

  • Entry: $77
  • Stop-Loss: $76.50
  • Risk: $0.5
  • Target: $80
  • Reward: $3
  • Risk:Reward Ratio: 1:6

Author's Note: This is just a sample in order to showcase the essential points of a trading plan. However, learning to draw a plan that suits your specific needs, including timing, budget and temperament is a must. Until you understand how to do so, use our samples. Nevertheless, trading profitably comes with the ability to manage risk to cut losses and run with wins. Pros don't assume they know the future rather they learn to operate with statistics.

Chart Of The Day: Oil Selloff Fueled By Fundamentals; Technicals Aren't As Clear
 

Related Articles

Chart Of The Day: Oil Selloff Fueled By Fundamentals; Technicals Aren't As Clear

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Apple
Continue with Google
or
Sign up with Email