Oil rally – last leg ahead
WTI crude oil is on rise and question is if this rally is sustainable ? Recent bullish dinamics is mostly driven by upcoming U.S. sanctions against major oil producers and Iran; this threaten to create tight supply and drive prices even higher.
Last speculative buy impulse is triggered by Trump’s decision on Tuesday to quit the Iran nuclear deal. Additionally, plans to re-impose sanctions against Iran which covers 4 percent of global oil supplies. Take also into consideration that OPEC cuts have already tightened the supply while market observes strong demand from Asia.
However, some market observers believe the increased production from US and some OPEC members pre-emptive greedy attempt to overcompensate the Iran’s output might turn situation back.
Let’s have a look at technicals. On a monthly chart we see the strong resistance level at 75 and current impulse looks strong enough to approach this wall. Normally this pattern has a very high probability play, so I would consider 75 as a target for current bullish move. What will happen at this lever remains to be seen, however, corrective bearish move is very likely from 75. Traders can sell call options with higher strikes when and if price approaches this resistance or utilise bearish spreads.
For shorter term traders the Friday price decline create perfect chance to enter another long leg, however, the patience is key here. Short term correction has to approach convenient buy levels at approximately 69-70 and 67 area, where limit buy orders will be localized. I expect price will bounce at those levels.
Summarizing, I believe bullish move is not finished yet and probability of further trend continuation till 75 is very high. Use support levels to enter longs – charts above show quite visibly strong support areas.
Have a great week ahead !