The price of oil is stretching to the upside on headline news.
- Qatari Foreign Minister is saying that Israel’s targeting of facilities 12 Aransas South pars gas field is dangerous and irresponsible
- The IRGC is issued an evacuation warning for several energy facilities across the golf
- An Iranian military source says that Iran will strike the enemies infrastructure after targeted its gas fields.
Those of the fundamental stories and they help to point to the upside.
Another way to view the market is through a technical lens. If you believe—as I do—that price is an ongoing auction between buyers and sellers around the world, then every headline, every data point, and every shift in sentiment is ultimately reflected in that price. By applying technical tools to it, traders can extract three critical things: bias (bullish or bearish), risk (where you’re wrong), and targets (where price is likely headed).
If the technical bias is bullish, it often means the underlying news flow is being interpreted positively. If the bias is bearish, the opposite is true. The key is this: price tells the story. More importantly, it tells you where your trade is wrong. If price holds above a level the market respects, the path of least resistance is higher. If it breaks below, the bias shifts.
Take crude oil as an example. Since March 11, price has largely traded between $91.45 and $98.21, with the 100- and 200-hour moving averages sitting in between—acting as barometers for bias. Yesterday, price tested the lower end of that range near $91.45–$91.65, where buyers stepped in and pushed the market higher.
At the lows just yesterday, the trading news was not bullish, but traders could still is the technical levels including the 200 hour moving average, the 50% retracement, and the swing level as risk defining levels. Stay above is more bullish. Move below is more bearish. The news did not tell you that. The price action and the technical tools told you that. Traders who bought against the level with a risk just below the level could risk a little to potentially make more than a little.
Subsequently, a move above the 200-hour moving average increased the bullish bias and attracted buyers, driving price toward the 100-hour moving average at $95.61, where momentum initially stalled. The news headlines contribute? Probably. Did traders know the headlines before the fact? No. However, the traders could defined bias in the risk from the price action and the tools applied to the price action.
Today the momentum has continued help by the news. The price has pushed above 100-hour MA at $95.62. That is now a new risk defining level. The break above that moving average gave buyers the go-ahead to push to the upside toward the next target as a bullish bias strengthened. A move back below the level would disappoint the buyers (it may also because of some unforeseen news).
On the topside, price is now testing the $98.21 swing high target, which also aligns with a key retracement level (broken 38.2% retracement) from the February low. A break and hold above that area would open the door for further upside momentum with $100, and the March 16 high at $101.04 and the March 15 high at $102.44 as the next targets. Get above those levels in the bullish bias increases further.
In the end, news may spark the move—but technicals define the trade. They give you direction, targets, and most importantly, your risk. And knowing where you’re wrong? That’s what keeps you in the game. That keeps you alive in the volatile markets caused by news/war.
This article was written by Greg Michalowski at investinglive.com.
