FxWirePro: WTI futures form head and shoulder, major trend still robust on lingering support at neckline – Trade binary puts and long hedge

Chart and candlestick pattern formed - Bulls of WTI futures in the major trend so far roaring ever since the formation of dragonfly doji with bullish EMA and MACD crossovers on monthly plotting.

Whereas the bears in minor trend form head and shoulder pattern with the head at 64.24, shoulder 1 at 62.74, shoulder 2 at 63.28 and neckline at 60.19 levels.

Since this chart pattern is bearish in nature, bears in short-term attempts to break below the neckline, whereas hammer pattern candle has countered this price behavior. Current prices remain below 7SMA despite prevailing rallies (refer 4H chart).

Both leading and lagging indicators (RSI, stochastic curves, moving average and MACD) are in tandem with the downswings completing the bearish pattern (H&S) but the further bearish action is dependent on a breach below 60.19 levels.

On the contrary, the extension of the consolidation phase by retracing more than 38.2% Fibonacci retracements, but the uptrend seems to be restrained at 50% on monthly terms.

In the recent Bull Run, WTI crude prices have managed to hit 3 years highs of $66.63 but couldn’t sustain that level (refer monthly chart). Although the bulls in the major trend seem to be exhausted at this juncture, the consolidation phase remains intact.

For today, the prices have been drifting in sideways but below 7SMAs as investors seek better clarity on official data from US today, unemployment rate and non-farm employment claims, while both leading oscillators have been signaling selling sentiments.

Trade tips: As the bearish momentum appears to be lingering, while major uptrend remains robust, at spot reference: 60.32 levels, one can think of trading one touch binary puts for the targets upto 60 levels.

Alternatively, on hedging grounds, one can keep the potential bullish risk of this pair on the check by adding longs in futures contracts of mid-month tenors with a view to arresting upside risks, we reiterate that it is wise to use dips to deploy long hedges using these WTI derivative contracts but using mid-month tenors as well.

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