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Oil Price Poised For Another Leg Lower? (Trade of the day)

Market forces for oil pricing have shifted focus from what OPEC and OPEC+ plans to do with production cuts (supply) to the global economic cyclical downturn and US-China trade war escalation (demand). Since the beginning of the year, the latter has always been a big worry for us as we understood that supply isn’t the only variable that drives the pricing of an asset; demand is also as significant. This still remains the case for oil has US-China relations continue to deteriorate on the back of an escalating trade war coupled with the cyclical economic slowdown in global economies.

Technically, price is trading within a “symmetrical triangle” or what is called a “Wedge” – price is currently trading below the resistance area of this continuation chart pattern (highlighted in grey) – which points to the increased likelihood that price trade lower to at least test the support area at the 52.50 price area [see D1 WTI chart]. Given the aforementioned, short positions can be set-up with the target set at the 52.50 price area.

Fig 1: Daily WTI/USOil/ US Light Crude Chart

WTI/USOil/US Light Crude (Nov. Fut)

Sell @ current market price (instant execution) Stop: 5537 Limit: 5260

Conversely, the risks here is swift progress with the US-Sino trade-war and/or an even more aggressive production cuts from Saudi and its OPEC’s cohorts which can significantly nullify the above outlook. Hence we always advise that traders always use a stop-loss to mitigate possible risks.

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