Technical Trader Targets Oil Breakdown

09/10/2019 5:00 am EST

Focus: ENERGY

Chris Vermeulen

Founder, TheTechnicalTraders.com

Recent news suggests that oil producers are attempting to increase production levels after failing to attempt to push prices higher by cutting production levels, explains Chris Vermeulen, chief market strategist at The Technical Trader

Globally, oil producers want to see oil prices rise above $65 ppb in an effort to support profit and production cost expectations. The real issue for the nation/states that rely on oil production/sales is that the global economy may not cooperate with their expectations over the next 24+ months.

Our researchers believe Crude Oil could become very volatile as price nears the apex of the Pennant/Flag formation that is setting up. This Daily chart highlights the attempted “scouting party” price rotation above the price resistance channel. 

The news over the past holiday weekend suggests the global economy may not see any real bump in activity over the next 12+ months and we believe this aligns with our longer-term research that Oil should target the sub $40 price level before the end of 2019 and potentially fall to levels below $30 in early 2020.

Oil Chart 1

We believe the key to all of this price rotation is the $50.50 level and what price does over the next 30 to 60+ days. There is a potential that price may attempt a brief upside move over this span of time, but the true intent of price is to move lower based on our ADL price modeling system.

Therefore, we believe the downside potential is the most opportunistic for traders. The next price target based on our Fibonacci bearish price trigger level is the $45 price range.

oil chart 2

This move could take place quickly, over the next 2 to 3 weeks on a breakdown move, or over many months. Watch the $50.50 level as that is the key.

If the price falls to any level below $50.50, then we could be moving towards the $45 level or even the $40 on a big move related to global economic expectations. Otherwise, expect the price to move towards the $50.50 level over the next few weeks as this support level is key to all future moves.

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