News from Brazil does not influence oil prices too often, but this time is different as it is connected to the well known OPEC agreement. Yesterday, we found out that Brazil will not commit to the cut directed by Saudis and OPEC. They said that the Petrobras (NYSE:PBR) situation is hard and this is not the time for a cut. Traders reacted with the fingers aggressively hitting the sell button and the price of the black gold declined.
This drop is continued today and is creating an interesting situation on the chart, with a potential mid-term reversal formation. What we can see on the chart is a head and shoulder formation (yellow areas), which is aiming the neck line located on a horizontal support on 53.9$/bbl (green area). From the technical point of view, breaking this area should trigger a strong sell signal on the Brent oil.
In addition to this, we can see that before they will hit the neck line, the price will test the trend line (black). Breakout here can increase the chance for a downswing but will not be a significant sell sign alone. For the full sell signal we need to see the price below the 53,9$/bbl mentioned above.
Sentiment here is still positive. The price is making higher lows and stays above important support but as we highlighted in this analysis, bullish sentiment may be coming to an end and it is better to know that before than post factum.
