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False breakout on the Oil is a fact

Published 07/24/2017, 05:59 AM
Updated 05/14/2017, 06:45 AM
It is hard to be bullish on Oil and believe in all those cuts and OPEC agreements if some countries actually increase the production. It is hard to be a buyer there when non-OPEC countries increase the output once they see even the smallest bump in prices. And yet, someone is always optimistic here, unfortunately for them, they are just the capital donors for the traders going short and selling every bit of that instrument.


Oil was a bit crazy last week. From the mid-term highs we went to a strong sell signal and a weekly lows. Mid-term highs were reached after we broke a very important resistance, which was a 50% Fibonacci and in the same time a neckline of the large Inverse Head and Shoulder pattern (orange area). Price was climbing and it looked quite nice but then something snapped.


Price dropped sharply creating a false breakout pattern (red rectangle), which is very reliable and indicates a strong reversal. Downswing additionally accelerated when we broke the lower line of short-term channel up formation (blue lines). After that, price had no brakes, all those buyers were caught off guard and their stop loss orders got activated additionally increasing the bearish momentum. You got to love the price action as if you study this method you know that it was created especially to anticipate such movements.


The closest support and the aim is 45,2 USD/oz (dynamic up trendline and a horizontal support). Chances that we will get there are extremely high. That can be just a start. I think that the movement down can be much stronger and the breakout of the lower blue line will release the demons that will keep last buyers awake at nights.

Oil WTI

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