WTI Price Analysis: Bulls targeting a weekly bullish correction, 1:3 R/R

This was a developing story

WTI is in a bearish trend, however, that is not to say there are no opportunities to long the black gold on its current descent. 

The following charts illustrate how the price is correcting a fierce downtrend, supported at the weekly structure and consolidating the monthly time frame in what is a weekly bullish correction. 

In a top-down analysis, we can illustrate where an opportunity has arisen for a 1:3 R/R (risk to reward ratio) on the four-hour time frame, taking cues from longer-term time frames, such as the monthly, weekly and daily analysis as follows:

Monthly chart

As can be seen, if the price respects the Fibonacci retracements, the 38.2% has a perfect confluence with the doji highs. 

This makes for a compelling downside argument as the price meets monthly resistance.

Weekly chart

The week is not quite over yet, with 19.50 mins to go at the time of writing. 

However, the weekly wick looks to be in its formation at weekly support.

Considering how strong the support level has been in the past, there is room for some upside to go yet.

Further corrective price action will leave a larger wick on the weekly chart by the end of this current week.

The weekly wick is essentially a bullish correction on the lower time frames.

Therefore, it is supposed to be filled in by a fresh wave of selling eventually, perhaps as soon as next week, which fits the bearish narrative nicely.

Daily chart

This is a daily impulse, correction and impulse scenario in the making.

The daily chart illustrates how the weekly downtrend has materialised into a daily correction at the weekly support.

In other words, we have seen a daily correction of the initial bullish correction. That is the impulse.

The length of this bearish retracement of the daily impulse is sufficient enough to expect some demand to come in and create the next bullish impulse.

There is an upside target on the daily chart, which is the 38.2% Fibonacci of the weekly decline, and it has a confluence of prior structure.

4HR setup

As can be seen, a buy limit order would have been the ideal scenario at the structure as highlighted on the chart.

However, there is still an opportunity 'at market' for a 1:3 R/R.

The setup involves a stop loss deep enough away so that if the prediction is wrong, then protection is there to prevent further loss below the weekly support. 

A break of weekly support would signal that the setup was wrong.

The position should be monitored on a 4HR chart and the strategy is only successful when proper risk management rules are applied.

The strategy caters for losing trades as well as the breakeven trades due to the win and risk to reward ratios of the strategy. 

As soon as the price creates the first bullish structure, meaning a new support structure above the entry price, then the stop loss can be moved to breakeven for a free ride to the target, or a breakeven outcome.

Update: Monitoring for breakeven into the close

The price is in positive territory so far and a breakeven scenario will occur when the first sign of new support structure appears on the 4HR time frame.

Update: The goals posts have moved

Move to stop loss to breakeven.

A significantly more bullish case could be made if MACD breaks higher on the approach to Target 1 from where the position can be added to.

As it stands, if the market falls, the setup fails at zero cost.

On the other hand, if the first target is achieved and MACD crosses the zero line confirming the bullish environment, the positing can be increased for a higher target.

Update

Positon closed at breakeven.