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  • WTI has played out exactly according to plan in a series of analysis which now offers a 1:5 R/R trading opportunity.
  • A sell-limit can be placed protected by a stop-loss to target structure to the downside. 

The price of WTI, which has been tracked in a series of analysis, as follows:

  • WTI Price Analysis: Bulls targeting a weekly bullish correction, 1:3 R/R;
  • WTI Price Analysis: Bulls back in the game, back to the drawing board for 1:3 R/R setup;
  • WTI Price Analysis: Bears lurking for weekly swing trade opportunity,

and the latest being, WTI Price Analysis: Bears lining-up for the ‘Kill Zone’, has, just as expected, moved into the ‘Kill Zone’ and offers a favourable risk to reward in a high probability trading setup.

The following is a market breakdown, in a top to bottom analysis of the state of play from which those interested in trading oil might enjoy how this trade setup plays out. 

For a recap of the market structure, let us start from the monthly chart that now has just 22 hours and 30 minutes to the close:

The monthly chart has left a wick that is around 50% of the length of the body. 

The significance of this is that it means there has been a good-sized correction of a weekly bearish impulse which has likely run its course.

Therefore, given that markets tend to trend, correct and then trend again, we can expect for this wick to be filled by the next monthly candle to the downside when the weekly chart starts to trend to the downside again.

So, let’s go to the weekly chart:

Perfect! As we can see, the weekly chart has indeed corrected in what appears to be a trending market to the downside in a 1,2 and 3 wave pattern.

We are in the throes of wave-3 being confirmed. However, we will not know this until the recent lows are broken. 

As traders, we need to make a decision before the fact.

So, let’s move down and look for additional information from lower time frames to help us in our decision making. 

Daily chart

As can be seen, the price has made a lower high on the latest bullish attempt towards resistance and the price action is playing out exactly as according to the previous analysis that is well documented in the links above. 

This is about as good as it gets, without having a crystal ball, when it comes to confirming the narrative and trading setup bias. 

We have a daily wick that is expected to be filled in on lower time frames. Again, this simply represents a bullish correction of a bearish trend.

A sell limit order can be placed, tactically, at the structure which just so happens to correlate with a round psychological number of 39.80.

Ideally, we would like to see the 20-day moving average here as well, but we cannot have it so perfect all of the time. It is situated slightly lower down around 39.44 on this particular chart. 

However, depending on the broker and price feed, you will find that it is, in fact, higher up, around 39.80 elsewhere, which is good news.

4-hour chart

The price is headed to the sell limit for a 1:5 risk to reward and high-probability trade setup. 

There is a deeper 61.8% Fibonacci target in the 39.90s that could well take the position into drawdown, to begin with, but that is ok as the stop loss is placed above the most recent highs and is protected thereby with some form of structure. 

There is also the risk that the market doesn’t reach the structure as intended and is rejected from the current resistance, thus, only making it as fas as a 38.2% Fibonacci retracement:

In such a situation, the trader can average into the position and sell some risk here and add to the position at a discount higher up later on.