OIL: US announced a complete cutoff to Iran Oil exports on Monday causing Oil to spike
It seems it was a long time coming, but the inevitable has happened. Oil has broken above the strong resistance area and psychological number of $64.50/$65.00. The strong overhead resistance has been capping price for the majority of April but has finally relinquished this and exploded higher towards our next resistance level seen at $66.00.
The catalyst? The US announced a complete cutoff to Iran Oil exports on Monday. Without digging too much into the fundamentals, Iran's exports equate to about 1.25 million barrels per day. Less supply to the market equals a greater demand for Oil.
The news could not have come at a better time as we look at the 4-hour chart on WTI. Our highlighted overhead resistance at $64.50/$64.25 was giving us quadruple tops, however, the price was being supported dynamically by our moving average. Price pushed all the way to create a new high just above $66 per barrel, looking rather weak and very overextended. In an ideal scenario, I would love to see a re-test of our highlighted resistance area at $64.50/$64.25 before continuing to push higher. A pullback play before resuming the current trend seems like a perfect play in my opinion. Shorts down to $64.50 before resuming the trend and looking for longs down at that area.
For these two potential setups, it is very clear to define where we are wrong and to exit the trade, stops above $66 for the shorts and stops below $63 for the longs. Caution is required for trading Oil at the moment as volatility is picking up in the commodity. Headlines could soon be released regarding Saudi Arabia making up the lost output from Iran, which could send Oil lower if confirmed....