Strat­egy:

Finweek English Edition - - COMPANIES & MARKETS -

Traders sell short the mi­nor bounces. The oil price has formed a medium-term head and shoul­ders (as la­belled). It re­cently broke down be­low line 3 (the “neck­line”) to con­firm that bear­ish pat­tern. Lines 1 and 2 form a large broad­en­ing for­ma­tion (or “mega­phone”). The only po­ten­tial bullish sign over the short term is that the sto­chas­tic os­cil­la­tor (on top) is over­sold. But cur­rently give the head and shoul­ders pri­or­ity. Traders sell short the mi­nor (eg, two-to three-day) bounces. Don’t take large po­si­tions be­cause of the over­sold sto­chas­tic. Note: The longer term pic­ture is still bullish. The short-term tar­get is down to US$98/bar­rel (spot price), based on the height of the head and shoul­ders pro­jected down. That’s also the ap­prox­i­mate tar­get given by pat­tern 1-2. (At the time of writ­ing Brent was at $106,38/bar­rel.) The ini­tial stop-loss for shorts is a close above $111,10. Note: When the price gets to its 200-day mov­ing av­er­age (at $102) lock in par­tial prof­its and lower your stop.

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