US oil prices remained weak after failing to seize the $62.00 level late last week. Oil continued to be sold after Saudi Arabia, the largest crude oil exporter, implied that they may increase production above record levels. Concerns for supply disruptions to stem from a Gulf of Mexico storm may provide a slight bid for the commodity.
The US Crude Oil daily chart shows the potential three day slide may find support from the 50-day Simple Moving Average, which is currently trading at $58.17. The bullish rebound from the $42.17 low to $62.58, is currently seeing price trade in a defined range that could see an eventual return of the longer-term bearish trend.
If we do see a significant collapse, price may find immediate support from the $53.50 region. It is around that area that a potential bullish Gartley pattern may form and provide a rebound. Major resistance will remain the $62.00 level. If price can maintain consecutive daily closes above that level, further upside could target the $67.50 zone.
The trade: Sell oil at $59.95, with a stop loss at $61.45 and take profit at $56.95. The risk/reward ratio is 1:2
Edward J. Moya
Senior Market Strategist
WorldWideMarkets Online Trading