22 August, AtoZForex.com, Vilnius – Pushed by a combination of not backing up major producers and China, oil hit $40. With price going to what appears like an imminent abyss, it is becoming scary.
Following Fibonacci Fan 38.2% downside break, crude has struggled to find any support and has been falling inside a downward slopping linear regression channel since, amounting to a 1200 pip decline. Currently, oil test a monthly support level at 40 level.
As approximated in the prior Oil Weekly, how low can it go? analysis, crude has added additional 200 pips to its bearish count.
Concerning further entry levels, the bearish market could be re-entered just below a local low and the monthly support level at 39.7 and aimed towards a first take profit at 150% Fibonacci retracement level at 38.6 and a second at a combination of a psychological support and Fibonacci 161.8% retracement level at 37. A stop loss around 40.3 could be used. From the second TP on, odds for a correction increase dramatically, if not, the abyss at 33.6 is imminent.
Alternatively, broken downward slopping linear regression channel and 123.6% Fibonacci retracement level ought to result in a prolonged retracement which could be taken as a buy opportunity to long oil from 42.3 to a first take profit at 43.5 area and second near Fibonacci 100% retracement zone at psychological resistance of 45. A stop loss at 41.7 might be taken.
With major crude oil producers such as Saudi Arabia, Iraq and US shale-oil companies not giving up, meanwhile, having oil demand softened, as China’s economy keeps contracting and devaluing CNY to boost the country’s exports, crude oil is forced to drift lower.
Nevertheless, having crude price levels at record lows, it is important to track the major oil producer production and oil-rig counts, since many rigs already are making a loss from $40 price.
Fundamentals to look out for next week:
- Wednesday’s US Crude Oil Inventories;
- Thursday’s US Prelim GDP q/q.
Current pip count: +890