Price action on the Brent crude 60-minute chart shows that the recent drop below the $30.00 a barrel handle on Tuesday has now seen price tentatively stabilize toward the $31.00 zone. Despite the pause in the bearish move, Brent oil is now trading at a discount to US crude. The March Brent futures contract closed $1.14 less than the WTI contract.
Today Iran announced that they will be increasing production, possibly adding to oversupply concerns. Iran also anticipates their sanctions to be lifted into the next few days. Goldman Sachs analysts also predict Iran to increase production in 2016 and 2017.
If we see bullish momentum return, key resistance may come from the $31.50-$32.10 zone. It is around that area that we may see a bearish Gartley pattern form. If valid, we could then see a resumption of the bearish trend target another test of the $30.00 level. Deeper support could target the $27.50 level.
If price continues to rally and invalidate the potential pattern, major resistance will come from the $35.00 level.
The trade: Sell oil at $31.50, with a stop loss at $32.50 and take profit at $28.50. The risk/reward ratio is 1:4