The Mideast conflict between Iran and US led Israel is risking the world towards another recession caused by the spike in crude oil prices. With no resolution in sight, the situation is getting worse and everybody is wondering – can crude oil break 150 dollars?
Technically, till few weeks ago, crude oil was finding 104 dollars as a strong resistance which is the 61.8% Fibonacci retracement of the down move from the highs of 2008 to the lows of 2009. But in early February, it broke that resistance convincingly with big volumes and confirmed the inverse head and shoulders pattern with a price target of around 134 dollars. So, by when it should reach this price target? Well, the move should be a result of several sub-moves.
Crude oil technical analysis and trading strategy revolves around the fact that it is moving in the weekly channel and maintaining it since November, 2011. Though currently it is below the 104 dollar mark, it has started the present week by giving respect to this weekly channel. The “fear premium” created by the conflict between Iran and US led Israel is also supporting these prices. Its a foregone conclusion that any failed negotiation with Iran, will shoot up the crude oil prices. Initially, if this results into breaking of downward sloping trend line from May, 2011, it should first complete its 100% Fibonacci retracement of the up move from the lows of 2009 to the highs of 2011 at around 115 dollars. This will open the gates towards 134 dollars and the psychological mark of 150 dollars. But for this trade setup to get successful, it has to maintain 100 dollars as a strong support.
So, in the short term, one can buy crude oil between 101.6-102 dollars for a price target of 104-105.4 dollars with a strict stop-loss of 100 dollars. And if crude oil keeps itself above these prices, it should reach 109-115 dollars and then to the above mentioned targets in the medium term.
Now it’s your turn…..
Feel free to share your experience and thoughts in the comments area.
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