Trade Recommendation: US Dollar/Crude Oil

The US Dollar/Crude Oil (USD/WTI) pair started its bull run in May 2009 when it took out resistance of 60. The force of the breakout was so strong that the pair skyrocketed to as high as 114.79 in May 2011. In two years, the US dollar rose by over 91% against crude oil. Those who bought the breakout were happy to dump positions.  

As breakout players locked in their gains, the market dropped to 75 in October 2011. Bottom fishers bought the dip, but they were only able to lift the market to a lower high of 112.21 in August 2013. The bearish price action was noticed by market participants.

Support at 86 snapped in October 2014. This ignited a selling frenzy that caused the market to plummet to 26.08 in February 2016. From there, the market rallied and it appears that USD/WTI has recently reversed its bearish trend.

Technical analysis reveal that the US Dollar/Crude Oil pair has broken out of a large rounding bottom pattern on the weekly chart when it took out resistance of 60 in February 2018. It recently went as high as 67.73, but it may open lower this week. This could be your opportunity to buy near the breakout point.

The strategy is to buy USD/WTI as close to 60 as possible. Keep in mind, this is the equivalent of shorting crude oil against the US Dollar. If bulls defend the support amidst a bear attack, the market will use the opportunity to build the base at 60 and climb to our target of 86. The process may take six months.

Weekly Chart of USD/WTI

As of this writing, the USD/WTI pair is trading at 67.36

Summary of Strategy

Buy: As close to 60 as possible.

Target: 86

Stop: 54

 

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.