Summary:
- Brent Oil ended last week at highest level since November 2014
- Price has rallied more than 50% from June 2017 low
- Reversal signals around here could provide possible short opportunities
Brent Oil recorded a third strong weekly gain on Friday evening and in doing so ended the week at its highest weekly closing level since November 2014 – when OPEC stood pat and let the price tumble to try and restrict the growth of US shale production and the market has one of its largest weekly declines in recent years. . We noted in our 2018 trade ideas that the $69 handle could be an area to consider short positions and the recent high last week was $68.27.
Brent Oil has traded back around the $69 handle of late which coincides with a prior resistance. Source: xStation
The high seen last Friday at 68.27 marked an incredible rally of around $24 in just over 6 months which in percentage terms equates to a gain of more than 50%! Given the large rise and the extreme level of long positioning in the market there is some suggestion that a pullback may lie ahead if price fails to break the recent high at 68.27. Fib retracements of this rise may provide possible profit targets for shorts or potential supports for longs await a pullback to buy. The 23.6% comes in at 62.64 and 38.2% at 59.16.
Fib retracements could provide levels to watch out for should a pullback occur. Source: xStation
Honing in on shorter time frames to look for possible entry signals, the H1 chart provides something interesting. Price is currently in the Ichimoku cloud on H1 and a break below here could be seen as a signal that the latest leg higher, where the market has been above the cloud since the middle of December is potentially coming to an end. As well as looking for price to break the cloud also keep an eye out for the accompanying lines which if they also cross below the cloud would provide further evidence that the recent uptrend may be over.
Brent is now in the Ichimoku cloud on H1. A break below could be seen as a signal that the latest uptrend since mid-December is over. Source: xStation