Brent: 50.00 broken through, but correction should happe on 07.08.2015

August 7, 2015

Current trend

During the Asian session oil prices rose slightly, however the general downwards trend continues. The USA is likely to lift the export ban on crude oil; thus, US oil together with Iranian oil will be added the existing global oversupply. In the medium term, the excess of supply over demand remains the main factor affecting the oil prices.

Today, Non-farm Payroll is released in the USA. The statistics may show the growth in employment rate, US economy improvement and, as a result, the increase in the demand for oil in the short run. However, the oil prices are likely to continue falling after a short-term correction.

Support and resistance

The price is in the downwards trend since 2014 and is falling to the year lows 47.00-45.00 $ per barrel.

OsMA and Stochastic on the weekly chart are giving sell signals; however, on the 4-hour chart they are giving buy signals. On the daily chart the indicators are turning into long positions.

A short-term upwards correction to 50.00, 50.50, 51.00 and maybe to 52.50 is possible. However, a sharp fall may follow, thus, two scenarios are possible. Wait when the correction finishes and indicators turn to sales or open small long positions with short stop-losses. The second one is more risky.

Support levels: 49.00, 48.10, 47.00.

Resistance levels: 50.50, 51.50, 52.50, 55.00.

Trading tips

Open short positions when indicators on the 4-hour char turn to sales (OsMA is below the zero line, Stochastic is below “50” level). Pending sell orders are also relevant from 51.50, 52.00, 52.50 with targets at 50.00, 49.00, 48.10, 47.00, 46.75 and stop-loss at 55.50

Alternative long positions may be considered only when the level of 57.00 (EMA200 on the 4-hour chart) is broken through. In this case, targets may be 60.80, 62.80 (Fibonacci 23,6%).

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