On Friday, the Brent oil prices successfully performed a rebound from the uptrend line, as it was anticipated in the previous forecast. However, the new week for oil started with another momentum of decline, and this time the risk of reversal of the entire growing trend of recent months has significantly increased. If prices fail to move back above the trend line in the coming days, the downside target for the Brent oil price will be the lows of early January near the level of 78.
The main reason of pessimism is still the bankruptcy of SVB bank and fears regarding the state of many other companies in the world financial markets. The U.S. authorities have rapidly taken measures to prevent mass panic, thus keeping the market participants from large-scale sales. It is quite logical that the shares of banks remained under the blow, but other financial assets were doing rather well. At the same time, the oil prices were still affected by investors' concerns about serious economic problems, which are gradually starting to manifest themselves.
Concerns about oil demand additionally reinforce opinions that China's economic recovery will not lead to a significant increase in energy consumption. China's target of 12 million new jobs corresponds to employment growth driven primarily by the service sector, rather than the massive investments in industry, infrastructure and real estate that were previously the case. Such a shift could mean that the almost automatic mechanism of transmitting China's accelerated economic growth to higher oil prices could work much weaker this time.
After breaking down the uptrend line, the Brent oil price has now fallen to the lows of early February near the 79.7 level. If the price fails to keep at this level as well, then the bears will try to reach this year's lows, set in early January just below the level of 78.
The following variant of a trading strategy can be suggested:
Sell Brent oil when it falls below 79.7. Take profit – 78. Stop loss – 80.9.
Traders may also use a Trailing stop instead of a fixed Stop loss at their convenience.
This content is for informational purposes only and is not intended to be investing advice.
