New week starts with ongoing oil correction

30 January 2023 278
New week starts with ongoing oil correction

WTI oil met its upside target of 81.7 before switching to a corrective decline. The resistance at 82.5 is still limiting the price's rise, so some fairly strong triggers are needed to get over it. Stressing factors may already do their trick this week, but they are shifted to occur from Wednesday to Friday, and the correction could continue until then.

 

Unlike the previous week, which was a kind of lull, this week is rich for all sorts of events directly or indirectly related to the oil market. Chinese factories are getting back to work after the holidays, OPEC+ ministers and Fed officials will meet on February 1, and the next day the ECB and Bank of England will do the same. The week will end with the U.S. labor market report for January on Friday.

 

No significant news is expected from OPEC+, however central bank meetings may bring unpleasant surprises, especially for oil prices.


China will be put at the heart of the current week with its manufacturing and services PMI’s release tomorrow. The PMI services are expected to improve sharply to 52, but the manufacturing index is still expected to remain below 50 and indicate a slowdown in industrial activity despite a forecasted increase from 47 to 49.8. The first results of the holiday week also point to improvements in China's economy, except transport and services, the growth rates seem modest.

 

There are no reasons to believe the correction of oil prices will last for a long time, however the fall to 78.4 level is quite possible. The next target of 77 probably will be released in case of a significant negative outcome of the central bank meetings, but for now there is a focus on a moderate decline.

 


The following version of trading strategy might be offered:

 

Sell WTI oil in the 79-79.2 range. Take profit – 78.4. Stop loss – 79.5.

 

Traders may also use 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.

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