How to Play Crude Oil in the next few days
Oil has made quite the move, rallying nearly 330% from the huge wick low of 6.6$ and 150% from its 10.5$ low. Now Oil has formed a ascending triangle. Ascending triangles are a signal of high volatility to come. To play this smart here are some options
Long the Ascending triangle with a target of 31-33$ ( roughly 20% up )
and given the prior huge rally higher, its more likely to break to the upside to the 31-33$ range ( roughly 20% move ) and in 3-5 days, we shall see either a big move to the downside or the upside.
Fundamentally we have some bullish news with Suadia Arabia pledging to cut an addition 1million BPD and other OPEC members agreeing to cut
Short Position
On the 4 hour time frame we have bearish divergences on the stochastic RSI and RSI, suggesting potential trend exhaustion and a break to the downside. This is possible since we have rallied quite a bit from lows. That being said divergences can have shortcomings in ranging markets formation as we are. Daily stochastic RSI is also overbought. Despite lockdowns easing, many companies and people are not getting back to there usual traveling routine as much. Domestic Air Travel in the US is still extremely low with states like California NewYork etc still not having much activity with plans to extend the lockdown 2-3 months.
Both
One can short the 26.5-27 area with a stop loss at 28$, and long the 25.5-26.5$ area. Then if oil hits the bullish target of 31-33$, take profit on 65-70% of the the long and hedge a short at 31-33$ range with a stop at 34$. Keep the rest of the long to ride and buy the dip in case we rally higher
Long the Ascending triangle with a target of 31-33$ ( roughly 20% up )
and given the prior huge rally higher, its more likely to break to the upside to the 31-33$ range ( roughly 20% move ) and in 3-5 days, we shall see either a big move to the downside or the upside.
Fundamentally we have some bullish news with Suadia Arabia pledging to cut an addition 1million BPD and other OPEC members agreeing to cut
Short Position
On the 4 hour time frame we have bearish divergences on the stochastic RSI and RSI, suggesting potential trend exhaustion and a break to the downside. This is possible since we have rallied quite a bit from lows. That being said divergences can have shortcomings in ranging markets formation as we are. Daily stochastic RSI is also overbought. Despite lockdowns easing, many companies and people are not getting back to there usual traveling routine as much. Domestic Air Travel in the US is still extremely low with states like California NewYork etc still not having much activity with plans to extend the lockdown 2-3 months.
Both
One can short the 26.5-27 area with a stop loss at 28$, and long the 25.5-26.5$ area. Then if oil hits the bullish target of 31-33$, take profit on 65-70% of the the long and hedge a short at 31-33$ range with a stop at 34$. Keep the rest of the long to ride and buy the dip in case we rally higher
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