IFC Markets - Analytics

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    Technical Analysis #C-BRENT : 2016-06-20

    Oil may slump on Brexit

    Brent crude lost 4% last week. Many market participants believe the Brexit on June 23 may push oil prices to $40 a barrel. Will oil retreat?

    US WTI hit an 11-month high last week which pushed the active US oil rigs count up for the third week to 337 units. Previously their number had been falling for 23 weeks. Higher volumes of oil production may be additional factor to weigh on oil prices. Energy Information Administration reports the US oil stockpiles fell 933 thousand barrels last week which is far below the previous fall of 2.4mln barrels. The Russian Minister of energy said there is no need in production freeze and cuts given current prices. India reduced oil import in May by 7.6% since April.

    Brent

    On the daily chart Brent: D1 has broken down through support of the rising channel having reached the 1st Fibonacci retracement and the lower Bollinger band. The MACD and Parabolic indicators give signals to sell. The RSI is neutral and below 50. The Bollinger bands have contracted which means lower volatility and are tilted down. The bearish momentum may develop in case the oil falls below the 1st Fibonacci retracement and the lower Bollinger band at 47. This level may serve the point of entry. The initial stop loss may be placed above 11-month high of 53 or the surpassed support of the previous rising channel at 50.3. Having opened the pending order we shall move the stop to the next fractal high following the Bollinger and Parabolic signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. The most risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop-loss level at 53 or 50.3 without reaching the order at 47, we recommend cancelling the position: the market sustains internal changes which were not taken into account.

    Position Sell
    Sell stop below 47
    Stop loss above 53 or 50.3

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