This article is originally referred from IFC Markets Technical Analysis
On Tuesday Brent prices rose for the 5th straight day amid the forecasts on reduction in US crude oil inventories by 0,95-1 million barrels and gasoline by 1,1 million. Official American inventory data will be released on Wednesday at 16-30 СЕТ. In addition, a possible extraordinary OPEC meeting could be called over the idea of coordinated oil-output action. Will oil prices continue falling?
OPEC President Dr Mohammed Bin Saleh Al-Sada said that the meeting might be held on the sidelines of the International Energy Forum in Algeria from 26 to 28 September 2016. Note that cartel’s last official meeting took place on June 2. However, OPEC members failed to agree on oil production ceiling. The next meeting is set to take place on November 30.
Venezuela, Ecuador and Kuwait have already agreed on an output freeze, while Iran and Iraq oppose the proposal. According to unofficial data, OPEC is trying to maintain global oil prices in the range of $50-60 per barrel which is higher than the current levels. Previously OPEC representatives said that low oil prices will not allow to make the necessary investments to maintain production. Note that Iran is the main opponent to the output freeze agreement.
Lately the country’s Oil Minister Bijan Zangeneh stated that in September the output volume would increase to 3.8-4 million barrels per day. Theoretically, no further increase will follow and Iran will support OPEC output restraint plans.
On the daily chart Brent: D1 failed to breach below the 200 – day moving average and left the downtrend. The MACD and Parabolic indicators have formed the signal to buy. The Bollinger bands have narrowed slightly which means lower volatility and are tilted horizontally. The RSI indicator is in the rising trend and below 50. No divergence. The bullish momentum may develop in case oil surpasses the Tuesday high and consolidates above the support of the downtrend at 46.
This level may serve as a point of entry. The initial stop-loss may be placed below 200 – day moving average line and the last fractal low and Parabolic signal at 41,5. After opening the pending order we shall move the stop to the next fractal low following the Bollinger and Parabolic signals.
Thus, we are changing the probable profit/loss ratio to the breakeven point. The most risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop-loss level at 41,5 without reaching the order at 46, we recommend cancelling the position: the market sustains internal changes which were not taken into account.
|Buy stop||above 46|
|Stop loss||below 41,5|
Original Source: IFC Markets Technical Analysis