U.S. West Texas Intermediate Crude Oil soared on Friday as investors breathe a sigh of relief as OPEC and its partners decided to cut 1.2 million bpd.
On Thursday, Saudi Arabia took the wind out of the sail of the bullish traders when its oil minister said it would be happy with a production cut of about 1 million barrels per day. Prior to the comment from the Saudi’s, the market had been pricing in a cut in output of up to 1.4 million barrels per day.
The daily chart is set up for a breakout to the upside and we have identified what we believe is the trigger point for an acceleration to the upside. All the bullish traders need now is for OPEC and its major ally Russia to stick to their guns and cut output.
Monthly January West Texas Intermediate Crude Oil
(Click to enlarge)
One of the best ways to analyze a market is to take a top-down approach. This allows you to frame the market on the monthly and weekly chart then zero in on the daily chart for actual trade execution. It also allows you to determine the various trends that could be influencing the price action. For example, if the monthly, weekly and daily charts were all in an uptrend then the odds of a successful trade increase if you decide to trade the long side. Furthermore, it also helps let you know if you are trading with the trend or against. Trend traders tend to want to let trades run, while counter-trend traders tend to set objectives or exit…