Hunting For Oil
UK Oil (Brent Crude) currently is sustaining one of the markets largest trends. The pair has resumed its march higher from its previous low established just over a year ago at 68.14 a barrel in May of 2010. Since that time price has moved steadily upward forming our 2011 high at 126.96 for a twelve month increase of 86%.
OPEC (Organization of Petroleum Exporting Countries) is comprised of twelve member nations .Their meetings are heavily publicized events and the outcome of these events often are associated with changes in oil price. Yesterday’s meeting brought about inconclusive results. There was a push to increase Oil production by Saudi Arabia’s Oil Minister, however seven member nations voted against this proposal. With demand for oil ever increasing and supply from OPEC not increasing we are seeing strong positional for our trend to continue.
Taking price in to a 4Hr chart, we can see pastresistance (117.00) currently being broken. Previous resistance was formed by connecting our highs for May on the 11th and 31stwedging off with support prior to breaking out. A break above allows price to challenge yearly highs at 126.96. If price fails to stay above new support (old resistance) UKOil has the potential to challenge the next line of support at 108.11 a barrel.
My preference is to enter the market to buy UKOil with the trend above support at 117.00 or better. Stops should be placed under previous support at the 113.38 per barrel price handle. Limits can be set at 125.00 or better for a 1:2 Risk/Reward ratio.
Alternative scenarios include price trading back below current support negating our bullish bias.
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