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OIL TRADING BAND BREAKOUT

  • Daryl Guppy
  • 16 November 2017

The NYMEX breakout above long-term resistance near $54 has caused a ripple of excitement in what has been a largely moribund market for nearly 18 months. Sure, there were trading opportunities in the rallies and retreats between $43 and $54 but slow-moving volatility doesn’t make for good trading.

The key question is to decide if the breakout his just a temporary rally, or part of a longer-term trend breakout. The second question is to set the upside targets.

Oil trades in bands. It doesn’t trade in trends, or at least it hasn’t really done so since 2010. The standout feature on the chart is the strong support level near $43. This is not an exact level, but this area has been tested consistently from 2015 until the most retreat retest in July. Starting 2016 April, the oil price has stayed above this support level and moved in a prolonged sideways pattern.

The upper edge of the sideways pattern is near $54. Between 2016 December and 2017 February, it acted as a strong resistance level. The rapid breakout is generally considered a strong bullish feature but this breakout has shown no good follow-through.

Support near $43 and resistance near $54 makes the trading band around $11 wide. In the past, oil has often trading in trading band around $10 wide. The oil market appears to have re-set this spread, expanding from $10 to $11. This gives the upside projection target for the trading band near $65. This has been an unimportant technical level in the past so traders take a cautious approach to this target level because there is strong historical resistance near $61. Traders watch for consolidation near this level. A strong breakout above $61 changes this rally into a genuine trend break.

We use the ANTSYSStrade method to extract good returns from this rally but it too early to identify this as a trend breakout. Investors and traders pay particular attention when the price moves above resistance near $54 because a breakout rally could be very powerful and fast moving.

Any pullback and successful retest of $54 as a support level is a buying opportunity on the long side for the development of a longer-term uptrend. 


About the Author
Daryl Guppy (Australia)
Known as the “CNBC Chartman”, Technical Analysis Expert, International Investment Master, Daryl is an active private position trader trading equities and associated derivatives markets.

Daryl Guppy is Founder and Director of Guppytraders.com Pty Ltd. He is an active private position trader trading equities and associated derivatives markets. His most recent book is ‘The 36 Strategies of the Chinese for Financial Traders’. He is the author of several books including ‘Share Trading’, ‘Trading Tactics’, ‘Bear Trading’, ‘Chart Trading’, ‘Trading Asian Shares’, ‘Market Trading Tactics’, ‘Better Trading’, ‘Better Stock Trading’, ‘Snapshot Trading’. Several of these books are also available in Chinese & Italian, in particular, ‘Trend Trading’ has become a best seller and is available in Chinese.

Daryl developed the Guppy Multiple Moving Average indicator which is included in DZHI Advisor, Metastock, OmniTrader and other charting programs. He delivers accredited courses for the Singapore Exchange and Society of Remisiers, Singapore. He is an appointed foundation member of the Australian Government Shareholders and Investors Advisory Council. He is a regular technical analyst commentator and guest host on CNBC Asia Squawk Box.

As a technical trader, he relies mainly on chart and live market information to make trading decisions. He is the publisher of a weekly Internet newsletter Tutorials in Applied Technical Analysis, which explains technical analysis techniques and shows how they are applied to current markets. There are Australian, Asia, China and India editions of the newsletter, with each concentrating on local market solutions and trading education.

He is a regular contributor to the Sydney Futures Exchange magazine - Your Trading Edge, the US trading magazines - Technical Analysis of Stocks and Commodities, Active Trader, Working Money, Bridge Trader, Australia's Shares and Personal Investment magazines, Singapore's Smart Investor magazine and The Edge business weekly and Personal Money in Malaysia. He has a regular column in China's Weekly on Stocks magazine and in Shanghai Securities News. He also contributes to Poland's Professional Investor and provided sector analysis on the Singapore, Hong Kong, Malaysia and Philippines markets for i-invest handbooks.

He edited and contributed new material to the Australian editions of the US classics in the International Investors Bookshelf series, The Basics of Speculating and Day Trader's Advantage and Options: Trading Strategies That Work and Trading Rules and Mastering Technical Analysis. He prepared the introduction to the Australian editions of Breaking the Black Box (M Pring), A Technician's Guide to Day Trading (M Pring) and New Thinking in Technical Analysis (R Bensignor).

He provides web content to Sanford online brokerage, Reuters, On Line Trading systems, the Society of Remisiers, Singapore, Asiastockwatch, Telstra Big Pond Money and Quicken, Singapore. He provides charting chat room support and is co-host for the stockmeetingplace traders forum.

He trades from Darwin in the Northern Territory, of Australia, some 3,000kms from the nearest Exchange. As a result he makes full use of electronic advantages to actively trade the market and to keep in contact with other Australian and overseas traders.

He gives conference briefings for brokerage private clients. He is a featured speaker at the Australian Traders Expo, for the Sydney Futures Exchange Conference days around Australia and New Zealand, and at the Australian Technical Analysts Association annual national conferences. He was one of the speakers in the first Australian Equis Metastock seminar series. He also spoke at the On Line Trading Summit in San Diego which was webcast to traders throughout the world, and at the Technical Analysis Trading Forum in Orlando. He has spoken at trading conferences in Italy and France. He has also spoken frequently at all the major Australian Stock Exchanges, and for brokerage firms.

He was one of two foreigners (Jim Rogers and Daryl Guppy) to participate in the 2005 Chinese market outlook conference in Beijing which was broadcast throughout China. He is a keynote speaker at the 2007 China Capital Markets Investment Forum. His analysis has been presented at the 2005 Palm Oil Outlook conference sponsored by Bursa Malaysia and the BYSD Annual conference in Turkey. He is a regular speaker at the annual ASEAN Rubber Conference and at financial trading seminars in Shanghai, Beijing and Shenzhen.

He presents Certified Professional Training modules for charting and advanced technical analysis for the Singapore Stock Exchange and the Society of Remisiers, Singapore and the Hong Kong Securities Institute. He has worked with the Singapore and Australian Stock Exchanges to promote their cross trading link. He worked with Reuters Hong Kong to deliver trading and training workshops. He was the lecturer for the Casuarina Senior College charting course.

He also runs public trading workshops, and equity and futures brokerage sponsored seminars for clients such as National On Line trading, CMC Markets, Beijing SEEC in Australia, Kuala Lumpur, Singapore, Shanghai, Dalian and Paris. He provides in-house training support for fund managers, brokerage dealers and remisiers.

He presented several on-line workshop conferences for Pristine.com and Compuserve Investors Forum. He has appears regularly on CNBC Asia, Squawk Box as guest host technical analyst, Asian Wall Street Journal, Trading Day, Channel News Asia and ABC radio and television.

He was retained as a consultant by several Australian and Singaporean brokerages and financial portals to advise on the development of Internet based brokerage, trading and information services. He is a member of the Australian Technical Analysts Association, the Technical Analysts Society of Singapore and the International Federation of Technical Analysts.


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