As mentioned in our weekend post the major trend line, dating back to last summer, is playing a key role this week. This trend line is highlighted on the chart below.
As previously discussed $67 is the major support, it is just below the trend line, and a previous low-volume-area. Historically this price level has been both support and resistance, and is an excellent level to trade from for a decent risk/reward trade.
If I trade this, I’d prefer buying the $67 to $68 area with stops below $67. An initial target could be $72.5 which is another historical resistance area.
As there is a clear upward trend line, it is also possible to trail the stop, parallel to this trend line (show as the green diagonal line below).
We’ve been trading sideways between $68 and $70 since last Thursday (18th). So this range gives a good opportunity to go long at the bottom of the range, and fade out up to $70 and $72.5, according to position size.
If the support fails, then expect some major declines. It is a stong support level that has held for many months, if it shows weakness without a good pullback, then there’s a sign that the shorts are in control of the market.
As with last week, the EIA data on Wednesday 24th will likely test these levels, and give an indication of direction for the weeks ahead.