Buying a dip in a trending instrument is hit or miss. If you hit, you will know it. Consider yourself lucky because many before you tried and failed. If you miss you should also make sure you know it too. It is ok to buy a dip in a downward trend like oil, if you think something has gone too far, but make sure you do it with a reason, and if that reason does not remain in place, don’t mess with it.
If oil can stay above the 100 hour MA the bulls remain in control.
Yesterday I wrote the following post: Technical analysis: Will the correction off the rebound in oil find buyers now?. The conditions for the trade were outlined and the “don’t mess with it” level was established. The “don’t mess with it level” was indeed taken out, signalling that the downside was not yet done.
What actually happened was the price for oil wandered up and down in trading today, until the price made a break above the channel trend line in the last few hours. When the trend line was broken, the price shot higher . In the process, it moved above the 100 hour MA (blue line in the chart above) at the 57.03 level and the high from yesterday at 57.11
Are the buyers taking control? Is there reason to think the low may be in place?
Only if the levels broken remain broken.
The levels I would use as risk defining levels include the high from yesterday at the 57.11 level and the 100 hour MA at 57.03 (see chart above). Stay above this area and the buyers are starting to take back control. Move below, and the “don’t mess with it” advise kicks in again – at least for the time being.
Trends end, corrections begin with a shift in sentiment that is confirmed often by the technical clues shifting in the opposite direction. You can only tell if the shift in sentiment is “real” if it does not fail on the breaks. Watch for the price to stay above the 57.03-11 now. That is the risk for buyers now.
