We can say that beginning of the week is positive for traders on the WTI Oil. The price is advancing higher and is looking good from the technical point of view. What price action factors are supporting this bullish view? First of all, the trend. Long-term is obviously still negative but short and midterm are telling us to look north – the price is making higher lows and higher highs and local correction movements are relatively flat and do not break any significant supports.
Let me show you the latest correction in greater detail. As we can see from the grey areas, they were almost the same in terms of depth (~ 4 USD/bbl.) What is more, they were the same in terms of principle – they were both flags. In addition to this, second one ended with a trend reversal pattern (inverted head and shoulder- yellow area, black neck line). H&S ended the short-term correction and flag continued the mid-term upswing. That is a beautiful display of price action trading. To wrap that up, we have to mention about the bullish gap that was created after the market opened last week. That flag was just a gap closing movement, which as we know happens very often and is one of the foundations of the price action trading.
Now, the price is above all of the local important supports (higher line of the flag, 23,6% Fibonacci and a neck line). This gives higher odds for an upswing. Bullish scenario will be denied once price will break the 38,2% Fibonacci along with all of the previously mentioned levels. As long, as we stay above, the price should aim higher.
This article is written by Tomasz Wisniewski, a senior analyst at Alpari Research & Analysis