USOil: Bullish recovery brings prices towards previous triple-top just above 54.00 where resistance exists
The medium term daily candle chart below shows the price history of USOil, a Contract for Difference (CFD) that aims to track the underlying spot price of US Crude Oil. Today this CFD is trading near 53.70 around time of publication, and lower from session highs of 54.18.
In Mid-March the last time USOil was reviewed in Ideas You Can Trade, a lower-low was expected and subsequently was reached on March 18th near 52.00. Since then USOil has recovered but is still range-bound between last month's lows and 54.00 - a range that has contained prices for most of 2015 already.
Today resistance near 54.00 was again reached for nearly the fourth time (five including January 2nd), as the recent recovery from last month's low brought USOil just over 54.00 - which is again a level that had previously reversed bullish momentum with the latest such reversal in February (see triple top on chart below).
Now that USOil is testing above 54.00 again, a hold above this price should be bullish whereas a failure to break and hold above this resistance line could signal a sharp drop.
Below are examples of how to trade a bullish continuation or a bearish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 54.19 with a Limit to take profit @ 56.00 and a stop-loss @ 52.69 Risk/Reward Summary: Limit risk = 181 points profit /(-150) Stop-loss risk = Gain to Loss ratio = 1.20
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 43.04 with a Limit to take profit @ 41.38 and a stop-loss @ 44.14 Risk/Reward Summary: Limit risk = 166 points profit /(-110) Stop-loss risk = Gain to Loss Ratio = 1.51
Daily Candle Chart: