Overall Bias: Bearish with the potential for a breakdown.Instrument: Brent Crude Oil (UKOIL)
Current Price: $73.66
Overall Bias: Bearish with the potential for a breakdown.
Key Observations:
1. 12-Month Chart:
• Pattern: The chart is forming a Head and Shoulders pattern, which is a classic reversal pattern suggesting a potential significant downturn.
• Neckline: The neckline is around the $73.67 level, which is where the current price is hovering.
• Target: The measured move from the head and shoulders suggests a potential decline towards $42.00 if the neckline breaks convincingly.
• Fibonacci Levels: The 0.236 Fibonacci retracement at $68.20 is the immediate support, with more substantial support around $58.19.
• Resistance Levels: Resistance levels are at $84.00 (0.5 Fibonacci retracement) and $94.40 (0.764 Fibonacci retracement).
• RSI: The RSI at 59.28 indicates the market is approaching neutral but with a slight bearish bias.
2. 1-Month Chart:
• Price Action: The monthly chart shows a downward trajectory after failing to hold above $135.00, with the current price around $73.67.
• Support Levels: Immediate support is at $56.42, corresponding with prior lows.
• Resistance Levels: Key resistance is at $135.00.
• RSI: RSI at 53.66 is neutral but leaning towards bearish territory, with the market potentially heading lower.
3. 1-Week Chart:
• Price Action: The weekly chart also reflects a bearish outlook, with a key failure to maintain levels above $121.83.
• Support Levels: Key support is around $84.16 (0.236 Fibonacci retracement).
• Resistance Levels: The $102.99 level (0.618 Fibonacci retracement) is a critical resistance zone.
• RSI: The RSI at 45.51 suggests bearish momentum is gaining strength.
• MACD: The MACD shows bearish crossover, signaling the potential for further downside.
4. 1-Day Chart:
• Price Action: The daily chart reveals consistent downward pressure with the price breaking below $86.67, now testing the $73.66 level.
• Support Levels: $73.66 is the immediate support; if broken, the price could head towards $71.10.
• Resistance Levels: Resistance levels are at $82.54 and $86.67.
• RSI: The RSI at 44.63 is bearish, indicating continued selling pressure.
• MACD: The MACD is showing a bearish crossover, with no signs of reversal yet.
5. 4-Hour Chart:
• Price Action: The 4-hour chart shows a clear downtrend with multiple failed attempts to reclaim higher levels.
• Support Levels: Immediate support is at $71.10, with potential further downside.
• Resistance Levels: Resistance at $79.39 and $86.67.
• RSI: RSI at 34.85 is approaching oversold territory, suggesting that while bearish momentum is strong, a temporary bounce could occur.
• Volume: Volume indicates increasing selling pressure, which supports the bearish case.
6. 1-Hour Chart:
• Price Action: The hourly chart indicates aggressive selling pressure, with the price failing to hold above $91.79 and falling towards $73.66.
• Support Levels: Key support is at $73.60.
• Resistance Levels: Immediate resistance at $79.39.
• RSI: RSI at 24.28 indicates that the market is oversold, so a short-term bounce could be expected, but the overall trend remains bearish.
• MACD: The MACD is deep into bearish territory, confirming the downward momentum.
7. 30-Minute Chart:
• Price Action: The 30-minute chart shows a steep decline, with no significant support levels being held.
• Support Levels: The $73.80 level is being tested as a key support.
• Resistance Levels: Resistance at $78.28 and $82.67.
• RSI: RSI at 26.86 is deeply oversold, indicating a potential for a brief relief rally, but the larger trend remains bearish.
• MACD: The MACD is in strong bearish territory, reinforcing the likelihood of continued downside pressure.
Strategy Recommendation:
Primary Bias: Bearish
• Short Entry: Consider shorting if the price breaks and holds below $73.60 with a target towards $71.10 and potentially lower to $68.20.
• Take-Profit Levels:
• First Target: $71.10 (immediate support).
• Second Target: $68.20 (0.236 Fibonacci retracement level on the 12M chart).
• Third Target: $61.73 (longer-term support).
• Stop-Loss: Place a stop-loss above $79.39 to protect against a bullish reversal.
Alternative Scenario:
• Long Play: If the market holds above $73.66 and shows signs of strength, consider a speculative long with a target of $82.67.
• Long Entry: Enter above $78.28 with a stop-loss below $73.60.
• Profit Target: $82.67, with a stretch target at $86.67 if bullish momentum resumes.
Risk Management:
• Position Sizing: Use conservative position sizing due to the high volatility in oil prices, risking no more than 0.5% to 1% of capital per trade.
• Adjust Stops: Consider using a trailing stop to lock in profits as the trade moves in favor.
Conclusion:
The Brent Crude Oil market is showing significant bearish signals across multiple timeframes, particularly with the Head and Shoulders pattern on the 12-month chart. Short positions are favored, especially if the price breaks below the critical support at $73.60. However, traders should be aware of the potential for a short-term bounce due to oversold conditions on lower timeframes. Conservative risk management and close monitoring of price action are crucial in this volatile market environment.
