Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Chart of the Day: Oil's Technical Chart Supports Goldman’s Bullish Call

By Investing.com (Pinchas Cohen/Investing.com)CommoditiesMay 03, 2021 09:35AM ET
www.investing.com/analysis/chart-of-the-day--oils-technical-chart--supports-goldmans-bullish-call-200577082
Chart of the Day: Oil's Technical Chart Supports Goldman’s Bullish Call
By Investing.com (Pinchas Cohen/Investing.com)   |  May 03, 2021 09:35AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

The price of oil has been ranging, as market worries whipsaw between optimism on a reopening global economy versus the resurgence of COVID-19 in many parts of the world which might delay the resumption of business as usual. As well, other concerns include OPEC+ allowing more output and a cyclical cutback in Chinese demand.

One headwind for crude has been the outlook for green energy under the Biden Administration. The prediction being made by some is that oil could start sinking, beginning in 2023, plummeting to as little as $10 by 2050.

Meanwhile, analysts at Goldman Sachs forecast that oil will hit $80 this year, as the market will find itself shockingly low on supply relative to the surging demand brought about by the restarting economy. In the investment bank's view:

“The magnitude of the coming change in the volume of demand—a change which supply cannot match—must not be understated.”

This supply and demand conflict is visible on the chart.

Oil Daily
Oil Daily

WTI fell below its rising channel since the Nov. 2 low, then proceeded to develop a descending channel. This pattern is shaped by sellers whose rising eagerness compels them to lower their offers while buyers remained cool, willing to bid only at certain levels. That's why this pattern is bearish. However, it’s complete only after downside breakout.

But here's where it gets interesting. The price broke to the topside, blowing out a pattern that's presumed to be bearish.

The effects of a pattern breaking to the opposite direction of where it’s expected to go often causes a market chain reaction that flips the dynamics from bearish to bullish.

Specifically, first, bears must cover their shorts. That's manifested as a sudden shot of demand, pushing prices higher. When the short squeeze is over, the price may stall or even return back toward the pattern.

The price should then find support by triggered long orders and those who’ve been waiting for some clarity on trajectory. At this point they may identify the breakout and would add their weight to the balance side of the equation, pushing prices up for a second leg higher.

By now, previous bears would be ready to get back in the game, joined by retail speculators. Most of the market is expected to be on the side of demand, pushing prices up for the third leg.

But before all that happens, currently the price is down for a second day, testing the top of the pattern. Notice the dotted red line. It demonstrates how the previous support, once broken, turned into a resistance, slowing progress.

At the moment, the price is finding support by the pattern top, but even if it falls back into the pattern, it could still rebound off the bottom of its current rising channel since the March low. Note, the channel bottom meets with the triangle top at $62, making it a presumed, reinforced support.

Based on the pattern height, which includes all the current interest in the contract, the implied target for oil is $74. Keep in mind, though, that even if it will, in fact, get there, it won’t do so in a straight line. That means traders can be stopped out of a winning position.

Trading Strategies – Long Position Setup

Conservative traders should wait for the price to make a new high above the Mar. 8, $67.98 high, then wait for a return move that creates a base.

Moderate traders would enter upon a return toward the channel bottom or the breakout of the red-dotted line.

Aggressive traders could enter a position at will, accepting the higher risk that goes with fewer confirmations, as part of the higher reward for being a step ahead of the market. Money management will be key.

If you don’t know how to customize a plan, here’s an example:

Trade Sample

  • Entry: $63
  • Stop-Loss: $62
  • Risk: $1
  • Target: $66
  • Reward: $3
  • Risk:Reward Ratio: 1:3

Author's Note: We don't have a crystal ball. We also don't claim to know the future. Our analysis could be wrong. And even if it’s right, it’s only so on a statistical basis. Even if the analysis would follow through this time, it doesn’t mean this trade sample will, or that it’s the best way to approach this trade.

You need to learn how to draw a plan that meets your timing, budget and temperament to maximize your odds. Till you do so, you can use our samples, but for educational purposes only. If you have fantasies of making money without understanding the full implication of the analysis, you will not. You will end up poor and unprepared for future trading.

Chart of the Day: Oil's Technical Chart Supports Goldman’s Bullish Call
 

Related Articles

Peter Krauth
Silver Headed To $300 By Peter Krauth - May 06, 2021 9

I know this might sound ridiculous to some, but I think silver could reach $300. No, I haven’t lost my mind. After all, it’s a metal that’s known for massive rallies. You see, when...

Chart of the Day: Oil's Technical Chart Supports Goldman’s Bullish Call

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.
Comments (6)
Filipe Pereira
Filipe Pereira May 03, 2021 12:25PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
The best oil price preview until now. You were on a good day.thanks so much friend
KN TR
KN_TR May 03, 2021 9:45AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thanks !
Tom Marshall
Tom Marshall May 03, 2021 9:32AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Always great to seeing your tech analysis Mr. Pinchas ! Just an off-topic question, but do you have any vision on Nat Gas as well ? Cheers
Md Ali
Md Ali May 03, 2021 9:00AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Secret Top
Secret Top May 03, 2021 8:50AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Then they should sell everything to buy oil now. It is only 60. They will be trillionnaire when oil is 80 lol.
Angelfaith David
Angelfaith David May 03, 2021 8:38AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
 
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
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email