Brent Bursts Into Key Resistance Zone
Faraday Research | Dec 01, 2016 12:41PM ET
Brent oil has rallied over 14% since Wednesday’s OPEC production-cut announcement and traders are unsurprisingly asking whether this burst higher has further to go.
With prices now probing a key resistance zone, price action during the next two sessions will offer a great indication as to whether Brent’s 2016 uptrend has legs.
The below chart shows Brent’s 3 year weekly candle chart.
The chart highlights that a resistance zone between $52.5 to $54.3 has been in place for sometime. Over the last 15 months, prices have hit but failed to break above this zone on four different occasions.
h3 Battle Ahead/h3With prices bursting higher into this zone, a battle between the bulls and bears will likely ensue. Clearly, short momentum lies firmly in favor of the bulls and many believe OPEC’s production cut will usher in a higher oil price going forward. Let’s not forget that it's the first OPEC production cut since 2008.
If prices break and hold above 54.3, that would represent a change in market structure and lay the foundation for a long-term uptrend to take shape.
At the minute, prices are at a point of inflexion. Moreover, with Brent implied volatility remaining elevated ,we are holding out on trading oil plays until we have clarity on whether the $52.5 – $54.3 resistance level holds.
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