Buying the Pullback in Oil at the 100 SMA

Crude Oil has retraced lower, but the trend is bullish so we decided to buy this pullback

Skerdian Meta•Friday, June 12, 2020•1 min read

The pullback is complete on the H4 chart

The situation changed dramatically for Crude Oil – from February until mid April it was crashing down. Then it turned bullish from -$37 for the next two months and climbed above $40 earlier this week. The break of the $40 level was a psychological barrier overcome, since the crash in Oil began at $40 and the decline continued until near -$40.

US WTI crude retreated from there but found support at the 50 SMA (yellow) once again, which had done that job before on the H4 chart. Sellers had a couple of attempts at breaking below that moving average, but after failing for the second time, Oil bounced higher.

Although, this time Crude Oil didn’t make new highs and it didn’t even move above $40, which was a sign that a decent pullback was underway. Another bearish reversing sign was the upside-down hammer candlestick just below $40. So, the retrace unfolded and WTI crude reached $35.40.

But, the 100 SMA (green) held as support during two attempts, which we took as a bullish signal, similar to the bearish one at $40. The two candlesticks also pointed to a bullish reversal in Oil,so we decide to go long at $36.04 with a stop at $34.90 and take profit target below the 50 SMA at $37.50. That signal got smoked after Oil pierced below the 100 SMA. But we opened another buy signal down close to $35, so now we are more than 100 pips in profit with this trade.

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ABOUT THE AUTHOR See More

Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.