Brent’s Bear Trap Sparks Relief Rally
Brent crude has surged more than 8% from last week’s lows, marking a significant recovery in the oil market. Let’s dive into the technical and fundamental factors driving this rally and identify the key price levels to watch in the coming days.
Geopolitical Tensions: The Catalyst Behind Brent’s Resurgence
A key driving factor behind Brent’s recent resurgence has been escalating tensions in the Middle East, sparking fears of a broader conflict that could disrupt global oil supplies. The US Defence Department’s decision to deploy a guided missile submarine to the region underscores the escalating stakes, with Iran and its allies threatening retaliation. Such a scenario raises the prospect of US sanctions on Iranian crude, which could remove up to 1.5 million barrels per day from the market. This potential supply shock has jolted oil prices higher, as traders brace for the possibility of a significant tightening in global crude supplies.
Technical Analysis: A Bear Trap Ignites Breakout
Daily Timeframe:
Last week’s price action saw Brent crude execute a classic bear trap—a scenario where prices briefly dip below a key support level, drawing in sellers, only to reverse sharply within a couple of sessions. This false breakout, or ‘fakeout,’ caught short-sellers off guard and sparked a wave of buying as prices rebounded, breaking above the descending trendline that had capped Brent’s price action throughout July.
This breakout signals a notable shift in short-term momentum from bearish to bullish. However, Brent is now approaching the 200-day simple moving average, a closely watched technical level that can act as resistance.
Brent Crude Daily Candle Chart
Past performance is not a reliable indicator of future results
Hourly Timeframe:
Zooming in on the hourly chart, Brent’s bullish momentum is evident, with prices forming steep ascending trendlines that underscore the strength of the recent rally. However, this momentum is now facing a significant test as Brent approaches a short-term resistance zone formed by the swing highs of late July and early August. A decisive break above this resistance would not only reaffirm the bullish trend but also coincide with a break above the 200-day moving average—a key technical signal that could attract more buyers and pave the way for a move toward the early July highs.
On the other hand, if Brent fails to clear this resistance, the market could see a retracement, potentially revisiting the levels around last week’s bear trap. This area will be crucial for traders to monitor, as it could serve as a strong support zone in the event of a pullback.
Brent Crude Hourly Candle Chart
Past performance is not a reliable indicator of future results
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 83.51% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
Geopolitical Tensions: The Catalyst Behind Brent’s Resurgence
A key driving factor behind Brent’s recent resurgence has been escalating tensions in the Middle East, sparking fears of a broader conflict that could disrupt global oil supplies. The US Defence Department’s decision to deploy a guided missile submarine to the region underscores the escalating stakes, with Iran and its allies threatening retaliation. Such a scenario raises the prospect of US sanctions on Iranian crude, which could remove up to 1.5 million barrels per day from the market. This potential supply shock has jolted oil prices higher, as traders brace for the possibility of a significant tightening in global crude supplies.
Technical Analysis: A Bear Trap Ignites Breakout
Daily Timeframe:
Last week’s price action saw Brent crude execute a classic bear trap—a scenario where prices briefly dip below a key support level, drawing in sellers, only to reverse sharply within a couple of sessions. This false breakout, or ‘fakeout,’ caught short-sellers off guard and sparked a wave of buying as prices rebounded, breaking above the descending trendline that had capped Brent’s price action throughout July.
This breakout signals a notable shift in short-term momentum from bearish to bullish. However, Brent is now approaching the 200-day simple moving average, a closely watched technical level that can act as resistance.
Brent Crude Daily Candle Chart
Past performance is not a reliable indicator of future results
Hourly Timeframe:
Zooming in on the hourly chart, Brent’s bullish momentum is evident, with prices forming steep ascending trendlines that underscore the strength of the recent rally. However, this momentum is now facing a significant test as Brent approaches a short-term resistance zone formed by the swing highs of late July and early August. A decisive break above this resistance would not only reaffirm the bullish trend but also coincide with a break above the 200-day moving average—a key technical signal that could attract more buyers and pave the way for a move toward the early July highs.
On the other hand, if Brent fails to clear this resistance, the market could see a retracement, potentially revisiting the levels around last week’s bear trap. This area will be crucial for traders to monitor, as it could serve as a strong support zone in the event of a pullback.
Brent Crude Hourly Candle Chart
Past performance is not a reliable indicator of future results
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 83.51% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
Disclaimer
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