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Jason Sen

WTI crude likely to have ended its two-year recovery

Jason Sen
On 8 November I wrote about how WTI crude had gained 35% in less than five months. Bulls have held control of this market since the very beginning of 2016 and the price has more than doubled now from a low of $26.05 to a peak of $59.05.

Weekly chart: December 2015 to date
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More importantly, I warned that the price was ‘approaching important longer-term 38.2% Fibonacci resistance at $58.97. Coupled with that is the equally important downward-sloping 200-week moving average, just starting to dip below this Fibonacci level… If you are a WTI crude bear looking for a low-risk selling opportunity, it could be worth trying shorts in the $59-$60 area with a stop above that 2015 year high. There is great profit potential on a short position if we reject those resistance levels.’
Here is a reminder of the weekly chart dating back to the 2013 peak at $112.24. This again shows that important 38.2% Fibonacci resistance at 58.97 and the downward-sloping 200-week moving average.
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Last Friday the price peaked at exactly $59.05 in severely overbought conditions. Although there is no particularly negative pattern or candle formation to back up my theory of an end to the two-year recovery, I entered a short position at the important resistance level.
The price so far has dipped just over two dollars to a low at $56.75. At this stage I see further risks to the downside targeting $56 to $55.80 and perhaps as far as strong support at $55.10/54.90.
This will be a big test and I do expect a decent bounce, showing the bulls are still in short-term control. The strength of the bounce will tell us whether oil has turned, as I believe it has. A peak at or just below $59 will form a small but negative double-top pattern.
Click to expand image
A break below three-month trendline support at $54.30 would act as the next sell signal. This would target $53.90 and probably as far as strong support at $52.60/52.30.
The only way bulls can regain control now is to break above the upward-sloping 18-month trendline at $61.00. If I am wrong and oil breaks above $61.00, this acts as a strong buy signal with a break above the 2015 high at $62.58, offering further buy signals to target $63.70/63.80 and $65.50/65.70.

Jason Sen

Technical Analyst & Trader
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The content of this article is the personal opinion of the author and not Intertrader. You should under no circumstances consider the information and comments provided as an offer or solicitation to invest. This is not investment advice. The information provided is believed to be accurate at the date the information is produced.

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