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Andreas Zanin
Analysis | June 8, 2021

KTM Commodity Weekly: : Monthly 200MA’s fiery nature along with a negative RSI divergence could shift the back gear.

Any asset prices that go up will eventually come down somewhat, and whatever breakdown down will eventually propel higher. In simple it’s the cycle of any asset class in the given period. Let’s look at the below table. Since July 2008, the oil price corrected between 76-81% on three occasions which followed recovery of 80.0 fibs and 61.8 fibs. And now the price rebounded 78.6 and still stretching its legs. How far it will stretch is the key question for oil traders and economists too. 

What if the oil price rally to $75, $80, and $87? So far, we forecast a target of $74 and $80, suggested by the wave theory. What in case the oil price pops to $87 or beyond? Correction is always healthy, but at one point, the financial system will go wild if the price fell like a dead weight. In opposite, rallies are welcome, but at one point, the economy will feel the pain. At what point the financial system will be worried about the current oil rally?

In early Tuesday morning, Brent is trading at $71, overnight printed a high at $72. The nearest resistance is located at Monthly 200MA at $74.50. As shown on the below chart, twice the price failed at monthly 200MA, and it is worth being cautious as we are approaching 200MA again.

Zooming out from monthly to the daily chart, negative divergence remains in play since February 18. Supports are located at $69.90 and $66. Below here, $64 and $60 exists. In the medium term, Brent should approach bullish bias as long as $60 served as support. Flipside, be cautious around monthly 200MA.

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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