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.

Target: 100

Stop: 65

 

Featured image courtesy of Shutterstock.

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.