WTI crude bulls seem to be exhausted at 50% Fibonacci levels, as a result, shooting star has occurred at 67.03 levels but on the flip side, the consolidation phase appears to be intact on break-out above symmetric triangle (refer monthly chart).
Although you saw rallies from last three days, the bears resume at $68.64 levels (i.e. 7DMA) with sharp dips (on the daily chart).
Prior to which, on the contrary, bulls test support at $65.85-$66.50 levels but these bull swings are not backed by both leading and lagging indicators.
In minor trend, more weakness seems to be on cards as the current prices restrained below 7DMA with bearish DMA and MACD crossovers.
Both leading oscillators (RSI & stochastic curves) have been bearish bias by showing downward convergence on daily terms, whereas overbought pressures are popping up. While bearish DMA and MACD crossovers indicate downside is likely to prolong further.
Most importantly, the impulsive nature of the rally implies a bullish character shift, especially given the effective test of key support at the March and February lows. With this week’s advance leading to a break of important initial resistance levels, the more immediate focus is on the January highs.
Given the extent of the rally, we sense some near-term pause is likely to develop against these key levels, but eventual new highs appear increasingly likely consistent with our view that the medium-term uptrend is incomplete.
Overall, one can expect more dips in the near-term, and the extension of consolidation phase in the major terms despite weakness in the short run. Hence, one can think of writing strangles by shorting 0.5% OTM calls of 1m tenor and short 0.5% OTM put of similar expiries as shown in the diagram.
Alternatively, aggressive bulls can initiate longs in futures contracts of mid-month tenors in order to arrest upside risks. Holders in a futures contract are expected to maintain margins in order to open and maintain a longs futures position.
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