Trade Recommendation: Brent Crude Oil
The Brent Crude Oil/US Dollar pair (BCO/USD) began to look bearish in February 2013 when it posted a lower high of 119.345. This snuffed out the market’s bullish steam. Those who saw the writing on the wall dumped positions to protect their capital. As the commodity succumbed to selling pressure, it broke support of 100 in September 2014.
The break below the support triggered the descending triangle pattern on the monthly chart. This ignited a selling frenzy that drove the pair down to 27.345 in January 2016.
At this price level, BCO/USD flashed reversal signals. First, we can see that the monthly candle had a long wick below its body. This indicated that bulls were starting to show up. In addition, the 4-day, 9-day, and 21-day moving averages were all detached from the candle. This was a signal that the move down cannot be sustained.
With a bottom in place, more bottom fishers entered the buying picture. The increased buying sparked a furious rally, one that we can take advantage of.
Technical analysis show that the Brent Crude Oil/US Dollar pair has taken out resistance of 70 in March 2018. This activated the large inverse head and shoulders reversal pattern on the weekly chart. The breakout was affirmed by a move up to 80.816 in May 2018. While the commodity has been correcting since, this is your chance to buy the dip.
The strategy is to buy on dips as close to 70 as possible. As long as bulls stay above this level, they have all the bullish momentum they need to climb to our target of 100.
The process may take more than six months.
Weekly Chart of Brent Crude Oil/US Dollar on OANDA
As of this writing, the Brent Crude Oil/US Dollar pair (BCO/USD) is trading at 75.02 on OANDA.
Summary of Strategy
Buy: As close to 70 as possible.
Featured image courtesy of Shutterstock.