Crude Oil Analysis – Aiming for $110

WTI Crude has been caught in a range since March 2014 within the limits of 104 and 98. Within this huge consolidation level, Crude has been making higher highs but the level of 104.53 remains a strong resistance level with price unable to break higher. In the larger perspective, since late 2013, Crude Oil has been rallying and the consolidation paints an ascending triangle pattern which is indicative in this context to be a continuation pattern.

The ascending triangle gives a target to 110, with interim levels coming in at 107 and the current resistance of 104.5. The upward path can be charted with the median line, where we notice price hugging the median line, which could point to a short term correction towards the lower median line. After softly breaking the previous high at 104.46, within the ascending triangle, we notice a very obvious strong support level at 101.7 which has been acting as a support/resistance level.

The chart below shows WTI Crude Oil, 8-hour chart.

WTI Crude Oil Analysis, 12/06/2014
WTI Crude Oil Analysis, 12/06/2014

WTI Crude Oil – Trade Plan

There are many ways to trade WTI Crude, both as a short term as well as long term plays. The most easiest of all would be to wait for a break of 104.5 (or 105) and wait for a retest to the region with a possible entry at 105 and stops just below 101.7, with the first target coming in at 107. Note that the 150% percent marks the halfway of the trajectory. This level acts both as support and resistance and therefore, either a part of the trade can be closed to book profits or moved to break even in anticipation of the eventual move to $110.

Trading with ascending triangles has shown that while most of the time the target level of 200% is reached, it isn’t always a smooth ride. There are instances where price completely reverses at the 150% level and takes a bearish turn. Therefore, due care must be taken in order to ensure not to let a winning trade from 105 to go back to being negative.

Alternatively, because price is currently at the median line, we can expect to see some sort of retracement to the lower median line. The support at this region comes between 102 and 103. So probably it would be best to wait for some candlestick confirmation such as engulfing or piercing line patterns to take a long position. Stops could be set to few points below 101.7

We will update this analysis once we notice some considerable price action on this analysis.

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