Recent Price Action
The price of US crude oil has been trading in quite a narrow sideways trading range in recent times, and seems to have stabilized between $50 and $55 with no clear direction.
However if you draw some trendlines on the daily chart of this particular commodity, you can see that the range is getting smaller all the time, and therefore a breakout is becoming increasingly likely:
Downward Breakout?
At the time of writing this article, the price has actually dipped below the lower trendline ever so slightly, hinting at a possible breakout, however it is still too early to call.
That’s because you really need to wait for the price to close decisively outside of an established trading range before trading breakouts.
So in this instance we will need to wait until the candle closes at the end of the trading session before seeing if this is an actual breakout or not.
I think it is fair to say that most traders are actually expecting the price of crude oil to bounce back rather than break lower because 89% of traders have long positions on eToro, and 87% of traders have long positions on IG Index, for example.
Therefore it will be interesting to see what happens in the coming hours and days.
Possible Price Targets
If the price does indeed break decisively below the lower trendline, then it could easily fall below $50 to around $48, and possibly as low as $45, although it is very hard to set any price targets with any real accuracy right now.
The fact that we are entering a quiet period of the year for the markets, ie Christmas and New Year, means that volumes are a lot lower, and as a result of this, price moves are harder to forecast because any price swings that occur can either be exaggerated or thwarted by low volumes.
I personally would be a lot more confident about trading an upward breakout because the price has already fallen quite substantially since the start of October. Therefore I would look for the price to close around the $53 level or higher before considering opening a long position, as so many traders are predicting.
However these are just my own thoughts and opinions. This in no way represents financial or trading advice of any kind.
I just thought I would alert you to a possible breakout that could be about to take place on US crude oil as we head into Christmas.
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