This daily chart of October Crude Oil futures exhibits two potential double top set-ups. The parameters of the larger of the two are highs of 7527 and 7500 with the trough (low) in between the highs being 6043. Penetration of the 6043 level provides confirmation to the double top and gives a measuring implication to approximately 4550.
The smaller potential double top formation has parameters of 7444 and 7500 as the high points with 6742 as the trough in between. The measuring implication if the 6742 level is breached is approximately 6050.
Based on the parameters for the smaller of the two potential double top formations, if a short position were initiated with penetration of 6742 while the highs were still in tact (and within a reasonable period of time as to not distort the set-up structure) and the objective of 6050 was realized that would be approximately $6,900 potential per contract. Likewise, if the short position were to be initiated at 6740, for example, and the price were to go back through the 7500 before electing stop protection the potential LOSS would be approximately $7,600.
Remember that nothing is exact or for sure but double top formations can provide excellent trading strategies and guidelines.
We have included the monthly chart of the crude oil futures because it illustrates two potential areas of significant resistance. First is the 50 month moving average which shown here reads as 7418. The front month future has been unable to close above this level.
Also there is the .382 Fibonacci resistance at approximately 7605. The high of the rally off the December and January lows represented by this monthly data has been 7500.
Futures and options trading contain substantial risk of loss and may not be suitable for all investors.
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