Technical Analysis of Oil
If we look at Fig. 2.16(a), we see that on 8th April 2011, Brent briefly reached a maximum of 126.88. Since then it has never approached that level again, what we have instead seen is a gradual decline in the average price level, with lower lows and lower highs.
On 4th October 2011 the price briefly dipped below the 100 level, turning around at 99.10. After that things started to change, the low of 102.36 we saw on 19th December was significantly higher than the previous low mentioned above. The price went on to break through quite a number of previous highs and as of today, 17th February, it is trading at 120.22, a price we last saw at the beginning of May 2011.
The green Chinkou Span line is far above the price of 26 periods ago. The price is also well above the red Tenkan Sen and the blue Kijun Sen lines and the Ichimoku cloud. All of this confirms a strong bull run.
The fact that the gradient of the price chart is quite steep indicates that there is strong momentum in the market.
Nobody, except a day trader looking for short-term gains, would go short in the current market. If the price should go above the record level of 126.88, we might indeed soon see it breaking through the 130.00 level.
If it runs out of steam and starts to fall back, wait for at least two closes below the Ichimoku cloud before entering a short trade.
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