UK Oil Ranging in UncertaintyPublished On: 23 May 2022, 9:30 AM | Jeraldine Tan, Senior Dealer
- UK Oil experienced a spectacular surge early March on the onset of the Russia-Ukraine war which sparked fear on Oil and Gas supplies given Russia was a key supplier of energy commodities.
- Since then the market has been in a wide range and consolidating in a triangle pattern as the market begins to be unsure about how the war would translate into price – no clear up/down bias.
- Most recently UK Oil has been well supported by the bottom trend line in mid-May, and rallied to the top of the range past the most recent high to test the previous high of 116.24. In a ranging market, we could expect more bears to be happy to sell at range high with profit targets at the bottom trend line.
- There are 2 interesting points to note. Firstly, the most recent high was breached – atypical of recent price pattern where market was consolidating in a triangle. Secondly, market tested the 116.24 high, it retraced but met with strong support in the middle of the range. Both could signal a build-up of upward pressure.
- Hence if market breaks out above the previous high, bulls can choose to enter a part of their risk on the breakout, with a view that market will test the next high/resistance at 124.20 level. If market breaks and retraces, bulls can look to add on the remaining tranche of their allocated risk.
- However fundamentally if there is no significant change, market should be expected to still trade range bound – if market breaks above the range and quickly reverses back (false breakout) then it could favour a continuation of the range bound price action and traders can sell that false breakout pattern with a stop loss above.
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