Forex Technical Analysis – Spot Crude Oil – Head and Shoulders Pattern

23 Mart 2010 Salı

The bullish streak spot crude oil has displayed over the past month and a half could be coming to an end. The 4-hour chart shows a head and shoulders reversal pattern forming, indicating a potential drop in the price of spot crude oil.

A long term rise in the price for spot crude oil occurred during February as the price rose from a low of $70 to a high of $83.31. This resistance level has been tested recently but all attempts of a breach have failed. This has set up a head and shoulders reversal pattern on the 4-hour chart.

The pair formed its first shoulder on March 12th at a price of $83.10, followed by the head forming five days later, reaching above the first shoulder at $83.31. The second shoulder formed today at a price of $81.83. Interestingly enough, the second shoulder took shape another five days after the head formed, for a pattern of 5-5-5.

A downward sloping neckline has been drawn underneath the head and shoulders pattern. From here we can estimate the potential downward price move. This is measured from the top of the head, down to the neckline (83.31-79.00).

A strategy traders may want to take based on the Forex Technical Analysis is to place an entry stop sell order just below the neckline. This could lead to potential 431 pip reversal in the price of spot crude oil.