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US Oil to Break Triangle Pattern Under 79.68

US Oil to Break Triangle Pattern Under 79.68

Walker England, Trading Instructor,

US Oil (WTI) continues to break down from its high established on May 29th at $114.80 a barrel. Since this point, we have seen a five month $39.12 a barrel sell off. This down trend has been seen consolidating through September and recently breaking lower after a test of resistance of our trend line at $90.49. As the move continues, trend traders will have many opportunities to join in with their preferred directional bias.

Fundamentally, oil prices are still tied to the ongoing global economic crisis. As we see economies slow, demand for oil will slow as well, driving prices down. This week’s economic calendar gave us decreasing US Durable Goods Orders and European Industrial Confidence numbers. Both sets of negative data lead us to believe that our trend has the potential to continue.

US_Oil_to_Break_Triangle_Pattern_Under_79.68_body_Picture_1.png, US Oil to Break Triangle Pattern Under 79.68

Price Action

Taking price in to a 4Hour chart we can see a potential breakout of a recently created symmetrical triangle. Price action is currently testing the support line found at $81.35 and attempting to break the previous low of $79.68 from September 28th. Lower lows will suggest that our trend is prepared to challenge prices under support and move to test the daily low of $75.68 from August 9th.

US_Oil_to_Break_Triangle_Pattern_Under_79.68_body_Picture_2.png, US Oil to Break Triangle Pattern Under 79.68

Trading Opportunity

My preference is to sell US Oil on a breakout of our 4H trend line under $79.50. Stops should be placed at $82.60. Limits will look for a minimum decrease of $6.00 a barrel to target $72.50, giving us a 1:2 risk reward ratio.

Alternative scenarios include price failing to break support leading to a re-test of our trend line.

Additional Resources

Trading the Euro Zone Debt Crisis

How to Trade Symmetrical Triangles

How to Trade US Jobs Report

Walker England contributes to the Instructor Trading Tips articles. To receive more timely notifications on his reports, email to be added to the distribution list.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.