Originally published by Guppytraders.com
Despite world tensions the NYMEX oil chart has barely moved in recent weeks or months. Oil offers rally and retreat trading opportunities but there is no clear evidence of a strong developing trend. There are good rally trades between $44 and $54 but these are followed by periods of sideways consolidation where nothing happens.
The single most important feature that stands out on the chart is the strong support level near $44. This is not an exact level, but this area has been tested consistently from 2015 until the most retreat retest in July. Its a central long term support level and the oil price has oscillated around this level. Starting 2016 April the oil price has stayed above this support level and moved in a prolonged sideways pattern.
The upper edge of the sideways pattern is near $54. This is not a well defriend level, but between 2016 December and 2017 February it acted as a strong resistance level. It has not been retested since February but there is a high probability it will again act as a resistance level. Support near $44 and resistance near $54 makes the trading band around $10 wide. This is an interesting coincidence because oil has often trading in trading band around $10 wide. However in the past these were at levels $48, $58, $68, $78 etc. The oil market appears to have re-set these levels but with one important difference. The $44 has become a central reference point with the oil price dipping as low as $34 and as high as $54.. The trading band breakout above $44 has resistance near $54.
There is a high probability that the upside projection target for the trading band is near $64. This has been a very weak level in the past so traders take a cautious approach to this target level because there is strong historical resistance near $60.
However, its too early to define a new uptrend so investors watch for evidence of consolidation around the long term resistance level near $54..
We use the ANTSYSS trade method to extract good returns from these oscillation rally and retreat movements. This is a long term trading band and in a sideways movement we do not apply Guppy Multiple Moving Average indicator analysis because this is most suitable for well-defined trend breakouts with strong trend behavior.
The oil price activity is not good for traders, but it suggests continued stability in world oil markets. Investors pay particular attention when the price moves towards resistance near $54 because a breakout rally could be very powerful and fast moving.
Daryl Guppy is a leading international financial technical analysis expert and special consultant to Axicorp. Guppy appears regularly on CNBC Asia and is known as "The Chart Man". Disclaimer: Daryl Guppy is not a financial advisor. These notes are for educational purposes only and provide an example of applied technical analysis.