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Developing story

 

The price of west texas intermediate has popped up from consolidation to form a new support structure from which could be the key to a higher probability trade setup.

Earlier in the month, the following article defined the bullish case, albeit in a premature trade setup that resulted in a breakeven outcome, in anticipation of another opportunity which is starting to unravel at the time of writing. 

Here is that prior analysis and trade story: WTI Price Analysis: Bulls targeting a weekly bullish correction, 1:3 R/R

Let’s remind ourselves of the market structure from a top-down analysis so that we can identify exactly where the highest probability trade setup is that can take some profit out of a bullish market.

 

Monthly chart

The overall bearish outlook remains on the monthly and weekly charts.

However, there is a current correction in play on the weekly chart from which there could still be some room to get involved with prior to the next wave to the downside commences. 

Weekly chart 

The weekly chart shows that the price is correcting to pick up some liquidity in what will most probably be an extension to the downside.

Daily chart

As can be seen in the daily chart, the price is already well underway in its correction, confirming the prior analysis in the previous article:

The latest price action is confirming the trade setup, but now it is a matter of timing and where to target.

The daily chart offers two upside target areas, 3 (I) and 3 (ii).

3 (I) is the highest probable target being the 38.2% Fibonacci that meets the first old support structure. 

3(ii) is the next old support structure that aligns with a 50% mean reversion of the same bearish daily series of daily bearish candles. 

As it stands, the price has bolted so we should expect a correction from where a buy limit order could be placed form where bulls could catch the next surge towards either or both targets on a lower time frame.

The 4-hour time frame would be ideal.

4HR chart

In the prior analysis, we identified MACD headed towards a bullish zero line cross and that is what we want to see before committing once again to the trade:

Prior analysis:

Current analysis:

Trade setup

Ideally, a momentum indicator should be in a bullish territory before committing to a buy limit. 

As it stands, a buy limit from support to TP (take profit) 1, or 3 (I) offers a 1: 2.5 risk to reward while there is a 1:3 risk to reward to TP 2, or  3 (ii).

Price action update will be updated here as it unfolds…

More to come…