2016-09-12 15:35:35

Review and dynamics
Information of the American oilfield services company Baker Hughes about the growing number of the active oil drilling rigs in the past week (by 7 units, up to 414 rigs), and the comments of the Fed representative, Mr Rosengren about the need to increase interest rate in the country, caused sharp decline in oil prices last Friday. The price fell below support level of 47.60 (ЕМА200 on 4-hour chart), but was stopped at the level of 47.45 (ЕМА50 on the daily chart).

On 4-hour, daily and weekly charts the price is in descending channel, above the key support level of 46.20 (Fibonacci 50.0% to the decline from $65.30 to the lows of 2016 at the level of 27.05 and the moving average lines of ЕМА200 and ЕМА144 on the daily chart).

Our opinion
The indicators OsMA and Stochastic on different time frames (H4, daily, weekly) give signals for the short position. The first "line of defense" of the "bulls", support level of 47.60 has been broken down.

In case of breakdown of the level of 47.10 (lower line of the ascending channel on 4-hour chart), the price can go down to the level of 46.20. In the event of the breakdown of this level, the price will go back in the downtrend, which started in June. The last levels preventing the fall in oil prices will be support levels of hen 43.65 and 41.70 (Fibonacci 38.2% and the lows of July/ August).

Fundamental background is favourable for the development of the following scenario: expectations of a positive outcome of the OPEC meeting in September in Algeria (freezing of the current levels of oil production in the world) can fail. At the same time supply of oil in the world is increasing also due to the increase in active drilling rigs in the USA.

As an alternative scenario the price can grow to the levels of annual highs at the levels of 50.70 and 52.80, which can be possible only in the case of two factors: reaching the agreement to freeze oil production at the OPEC meeting and the decision by the US Fed not to raise rate at meeting next week.

Support levels: 47.10, 46.20, 45.65, 43.65, 41.70 and 41.00.
Resistance levels: 47.60, 50.00, 50.70 and 51.00.

Trading tips

Sell on the market. Stop-Loss: 48.10. Take-Profit: 47.10, 46.20, 45.65, 43.65, 41.70 and 41.00.
Buy Stop: 48.25. Stop-Loss: 47.80. Take-Profit: 50.00, 50.70 and 51.00.

Downward movement to the level of 46.20
Downward movement to the level of 46.20

Breakout of support level of 47.60
Breakout of support level of 47.60