Hi Traders! Today I am sharing with you my Oil short term forecast based on technical analysis. If you are a regular follower of my technical analysis posts in this blog you could have already known about the analysis method that I am going to use in this post. If you are new to my blog then the method we will be using here is the top-down, multi-time frame analysis method and we will be looking for the possible trade opportunities in this commodity. Now, let’s start our analysis from the highest timeframe which would be the daily chart in this case.
Oil D1(Daily) Chart Analysis – Psychological Level, Bearish Divergence
On the daily chart, we had a bullish rally and the price which was moving higher reached a strong resistance zone around the psychological level 45, respected it, and is moving lower. We also had a bearish divergence that has formed between the first high that has formed on 7th June 2020 and the second high that has formed on 31st August 2020 based on the MACD indicator, which we may consider as evidence of bearish pressure. Currently, it looks like a correction is happening, we have the fist leg down followed by a pullback and there are no evidences that show this short-term bearish trend is over yet. So basically I am expecting the price to create one more leg to the downside. We may now move down to lower timeframe and see if we can find evidences supporting this short-term bearish view.
Oil H4(4 Hours) Chart Analysis – Strong Resistance Zone, Bearish Divergence
On the H4 chart, we have a strong resistance zone that has formed and the price which is moving higher has reached this strong resistance zone, respected it, and is currently moving lower. We also had a continuing bearish divergence between the first high that has formed on 6th October 2020 and the second high that has formed on 8th October 2020 based on the histogram of the MACD indicator which we may consider as evidence of bearish pressure. In addition to this currently, there are no evidences contradicting this bearish view. So everything looks good for the bears here, we may now down to one more timeframe lower and see if it has evidences supporting this bearish view.
Oil H1(1 Hour) Chart Analysis – Uptrend Line Breakout, ADX Indicator
On the H1 chart, we have a good uptrend line that has formed and the price which is moving lower has broken below this dynamic support and is holding below it, we may consider it as evidence of bearish pressure. Also, the ADX indicator gave a bearish signal at the cross of -DI (red line) versus +DI (green line), and the main signal line (silver line) reads value over 25, we may consider this as another evidence of bearish pressure. So based on all this my view here is bearish and I expect the price to continue lower further in the short term.
Technical Analysis & Forecast Summary
Oil D1(Daily) Chart Analysis
- Psychological Level, Bearish Divergence
Oil H4(4 Hours) Chart Analysis
- Strong Resistance Zone, Bearish Divergence
Oil H1(1 Hour) Chart Analysis
- Uptrend Line Breakout, ADX Indicator
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