A Correction Is Imminent After a Surprised V-Shape Reversal

Commodity

Summary:

Oil prices soared unexpectedly without sufficient consolidation. This trend may not be sustainable in the lack of a strong catalyst.

SELL WTI

Close Time

CLOSED

80.000

Entry Price

76.200

81.200

56.691 -0.748 -1.30%

120.0

Pips

Loss

76.200

81.204

Exit Price

80.000

Entry Price

81.200

Fundamentals

Recently, with the arrival of the peak tourism consumption season in the northern hemisphere, reports from the three major energy agencies, OPEC, IEA, and EIA, have raised confidence in oil demand improving and inventories decreasing in the second half of the year. As a result, the previous haze has been swept away. In response to the volatility of the crude oil market, OPEC+ has repeatedly assured that it may suspend or cancel the plan to gradually restore supply from October this year according to market conditions, which also helps oil prices remain firm.

In addition, investors remain concerned about a wider war in the Middle East. The Israeli military claimed on Sunday that the Lebanese Allah Party intensified its fire on the Israeli cross-border, which could lead to a serious escalation of the conflict. The rise in geopolitical risk premiums also supported oil prices.

However, with the improvement in supply and demand expectations mentioned above already being priced in advance, oil prices may lack stronger momentum to surge higher in the short term. This week, important data such as US retail sales and PMI will be released, which will also lead to volatility in oil prices.

Technical Analysis

A Correction Is Imminent After a Surprised V-Shape Reversal_1

Judging from the daily chart, oil prices have recently rebounded in a V-shape unexpectedly, which is symmetrical to the movements in early February. Before this, oil prices had risen and fallen continuously. At the beginning of June, oil prices even plunged. Just when the market generally believed that oil prices would continue such a strong correction, oil prices suddenly soared, recovering most of their previous declines in less than half a month, and completing the breakthrough of the downward trend line. At the moment, oil prices have turned bullish.

However, it would be difficult to sustain the rapid growth without a stronger driving force. In other words, the bullish structure is not solid. Currently, the trend has the potential to show a head and shoulders bottom pattern. However, as the price may oscillate at the previous high level symmetrical to the left shoulder, traders should be cautious about chasing the uptrend.

Traders are advised to buy low and sell high. When the price rebounds to around 80.0, you can also try to take short positions. The target can be set around 76.0, and the stop loss can be placed above 81.0.

Trading Recommendations

Trading Direction: Short

Entry Price: 80.0

Target Price: 76.2

Stop Loss: 81.2

Support: 77.5/76.0

Resistance: 80.0/81.0

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