Brent Crude is seeing increased volatility up at these levels which is common price action at market extremes. However, this market has ignored previous warning signs and pushed on to levels that looked unattainable only a few months ago. Our Marabuzo line at 114.97 now becomes strong resistance and a close below 112.49 increases the chance of further pullbacks. In fact, dare I say it, a close below 113.85 on Friday will give us a Bearish Engulfing Pattern on the weekly chart. In fact by blending the previous days two candles we already have achieved a less powerful Engulfing Pattern. We do have Oil Inventories today so things could get interesting.
Indicators in Play
To create our Blended Candle we take the open of the small red Candle and the close of the subsequent larger red Candle and treat these as one. This would give us a single larger Candle that completely engulfs the First green one.
These three Candles are very close to forming a perfect Evening Star, named after the planet Venus. This is the first star seen before darkness sets in.
Summary
In the short to medium term there is plenty of scope for a very decent pullback without changing the longer term Bullish picture. There is enough evidence to dip our toe to the short side and this will increase with a close on Friday below 113.85. A move below 112.49 also adds to this argument. This strategy would be abandoned should we recover back above 114.97.
David has been
analyzing and trading the worlds financial markets for the past 25 years. After an initial grounding with Mercury Asset Management and Warburg Securities he went on to set up his own brokerage operation in London. Since then he has appeared regularly on Bloomberg Television and been involved in providing analytics on behalf of some of the worlds major exchanges. He is also a member of the Society of Technical Analysts.
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