On Monday Brent oil prices demonstrated multidirectional fluctuations, although by the end of the trading session a slight increase was registered. Amid the day off in the U.S. and the UK market participants were not inclined to organize powerful impulses for oil prices. But today American and British investors return to trading, and one can expect a more pronounced direction in the movement of oil prices.
There are no important macroeconomic statistics scheduled for publication on Tuesday, but the market's peace may be disturbed by the PMI data from China early on Wednesday morning. The previous manufacturing and services PMI of the Asian country, which did not meet expectations, was a trigger for a massive sell-off of oil contracts in early May.
Experts will carefully examine new data on a possible increase in demand for fuel in the country which is the world’s main oil importer. Forecasts suggest China's industrial production will return to growth after April's slump, when the PMI fell below the 50-point border level for the first time since December. Improvement of business activity indicators may significantly support oil prices.
Meanwhile, the U.S. will gradually sum up the results of the past long weekend. Memorial Day is traditionally followed by a high season of automobile traveling, which is accompanied by a significant increase in fuel consumption. It's likely that many drivers, mindful of last year's spike in gasoline prices, have filled up their cars ahead of time this year. The API and EIA weekly reports, which are to be released this week on Wednesday and Thursday, will provide insight into how much the demand for petroleum products has grown.
The daily chart of Brent oil still shows support from the uptrend line. The price is likely to reach the range of local highs of May at 78-78.5 quite quickly in case of favorable news background.
Consider the following trading strategy:
Buy Brent oil in the 76-76.5 range. Take profit – 78.2. Stop loss – 75.5.
Traders may also use a Trailing stop instead of a fixed Stop loss at their discretion.