Crude Oil Price Analysis August 2020 | Economy Woes to Pull WTI Down?

by birtanpublished on October 5, 2020

The crude oil price has had a great recovery off those april lows but it does appear to be struggling over recent weeks so given the resurgence of the coronavirus in certain parts of the world are we going to see a much steeper fall from crude oil from these levels this is the the us wto wti crude oil chart uh we're looking at daily chart here we've had this recovery from from ten dollars in the cash market up to where we're trading now around about 41 dollars a barrel but you can

See um trade for the last uh few weeks or so has been really tight we're stuck in something of a tight range it pokes out now and again to fresh recovery highs but we don't really get um any follow-through and i am wondering well actually is the sensible trade to do up here to go short oil to look for some sort of a deeper sell-off perhaps down to these levels down to the main levels uh ahead of 30 a barrel or actually is this just a pause before the price

Pushes higher again and we target uh the march highs up around 50. i think it could be something of a key point uh this for the next the next few weeks of crude oil so in this video i'll talk a bit more about what's been driving the price what to look out for then we will come back onto this and look to place our trade hello i'm david jones from capital.com and i thought we'd do an update uh on oil looking ahead uh into august and see what maybe we can expect

From movements in the oil market i'm going to talk about what's driving it then we'll jump back onto the platform and see if we can get a trade on for the month of august as usual if you're watching this and you haven't subscribed if you could click on subscribe support the channel and it means we can continue to push out lots of regular content on different markets and trading strategies in the months ahead so let's get into it we have seen a recovery of course uh

In the price of oil since those since those lows that we had we've seen the price uh pretty much quadruple if we're looking at uh us crude as a cash market of course the uh the front month did go negative uh during april we had minus 38 dollars a barrel about that for the may contract but look at the cash market the prices quadrupled to trade up around 40 dollars a barrel although trading has been i think somewhat tight uh in recent

Weeks i'm not much in the way of volatility over the days plenty of movement movements throughout the days but but no real direction although saying that we did have four month uh plus highs just over the last couple of weeks or so but we do see oil break out through previous levels and not get any real momentum so i think i do wonder if uh at the current level are we going to see a short-term top for the price of oil of course we've had

Production cuts in place from opec plus these are due to be reeled in slightly from the beginning of august so we will see slightly more production in august but not returning back to normal where we were uh six months ago so still helping i think to try and keep that supply demand uh that balance in place but of course we are seeing resurgence uh of the coronavirus uh in in continental europe here in the uk in certain areas in in

Asia in certain u.s states uh this week in the uk that the uk prime minister boris johnson said that he fears there was a second wave of the virus is what we were seeing in continental europe so that that is still really a concern and clearly anything that affects the economy normally has an impact on the price of oil so i do wonder given where we are now has the oil market perhaps overestimated the pace of economic recovery

Uh over the next six months or so i think it's going to be a really interesting time but i am wondering is the opportunity now to be short oil up here we'll take a look on the platform in a second before we do that let's talk about the levels uh the most immediate resistance barrier 42.50 barrel that was the the four-month high hit you know perhaps if we break through there uh we can build a bit of momentum but um it does seem to be struggling really above forty dollars a barrel at the

Moment oil and then more recent support running from about thirty seven dollars up to just under forty dollars a barrel but let's put some numbers cut some color on these numbers uh have a look at things in more detail and get a trade on so before we get into the market we do have a trade running at the moment on brent crude from a previous video let's take a look at that so i'm short brent from the middle of july uh that trade is under water at the moment it went short at 42.48

The market is about 1.50.60 against us so a little bit of pressure on that trade but we do have stops in place let's take a look at a trade to do for us crude so here's the daily chart and the recovery um off those lows you can see just how tight trading has been we're going to have a look at the shorter term the hourly chart in a minute to try and pick up a bit better on what's been going on since the middle of june uh looking at

The rsi i've talked about this idea of bearish divergence in the past and i think it is a good signal it doesn't work all the time but i think it's more reliable than the overbought oversold signals and we do have i think an element of bearish divergence going on when the market is sort of trying to push higher but the rsi has really lost interest and we've got a falling rsi so it can be a suggestion uh that perhaps uh the trend is running out of steam

And we could have a short-term top-up here when it comes to the macd not too much going on really probably the last clear signal we had from the macd was uh back in june the 10th when the price was about 38 39 a barrel and the macd has just been drifting since then so let's just focus on the more short term the hourly charts uh over the last sort of six weeks or so so for now let's just focus on the price let's just get rid of the indicators so we do have this market it's still

Trying to go up we do still have you know i think a trend if we picked up on from these middle of june lows so i'll try and look something like that it's been a pretty good trend line um but you can see just a little bit sideways over the last couple of weeks and i think what's what's interesting is it tries to break out it broke out through these old 23rd of june highs broke out about a month later in july but we don't really get the

Follow-through so i wonder is there maybe not too much conviction to be a buyer up at these levels so the trade i am going to do i'm going to go short so i'm going to go short where the market's trading now around about 41.50 that sort of area we've clearly got a high at 42.50 up here so what i might do i'll give it a bit of room if it breaks that high but if it gets to sort of 43.50 i'm going to come out of the trade so i'm going to go short with a stop a couple of dollars above and i think perhaps if we do break these highs

Finally we have some sort of momentum in oil and it can target fifty dollars a barrel but for now because we are you know struggling up at these levels i wonder if perhaps the story for august is going to be one of drift for the oil price perhaps um back down to the early july lows around about 38 and a half dollars if these break i think we can start targeting uh 37 from the end of june so let me just put that trade on so selling at 41.50 uh with a stop in where did i say 43.50

For the stop so the trade setup so i'm going to sell 130 barrels uh where the price is trading now i've put a stop loss a couple of dollars above that's going to sit in at 43.50 if we flip back onto the chart you can see it's indicating on there where my stop is going to go i think if the price does break and get that high there's no reason for me to be short anymore and it's our usual risk of around a couple of hundred pounds

Uh on the trade that's it let's uh send the trade through so uh we sold at 41.55 uh in the end and i just wonder if perhaps there's this uh this slight downtrend that's been in place since the 21st of july if he can build on that and uh and sell off a little bit deeper but something of a boring market i think the last the last week or so but maybe things will um spark up uh in august let's just take a quick look at that trade so we've got a few trades running at the

Moment uh gold clearly has done well with the surge we've seen in gold the euro uh trade as well has done has done done well on weakness in the us dollar and here's the trade we just placed so selling 130 barrels at 41.55 the price has moved slightly against us so far so we're down about seven pounds on that trade but we'll see we'll see how august pans out we'll see if this sort of 42 to 4250 continues to be uh resistance and perhaps we'll be looking at at weaker

Weaker prices in a month's time that's it for the update we will see what the next few weeks brings for the price of oil but from me david jones and capital.com good luck with your trading for more trading videos just like this please subscribe to our channel

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