Trade of the week: short Brent crude oil

(Partial video transcript)

This week's trading opportunity

What I would like to do this week is to go short Brent crude oil. Now, there are several reasons. One is that the rally we saw the last few days because of heightened geopolitical tensions, in my opinion, is going to soon start to fizzle out, and that the longer term downtrend for the oil price is more likely to continue than not, simply because there's still a lot of supply out there and demand is relatively weak, for the time being.

And also, from a technical perspective, if we look at my chart on the video, we can see that the rally from the mid-December low can be subdivided into three legs. And this could be a zigzag correction, or an Elliott Wave A-B-C correction, in the direction of the trend - meaning this is a small counter trend correction, which may fail around previous resistance, as you can see on the chart. And then we resume the downtrend.

So, because we're trending lower and because we have been trending lower, if I zoom out all the way to June of last year, you can see we have a series of lower highs and lower lows. And yes, we are trying to rise above this high here on the chart (see the video), but right now we haven't really managed to do that. So that's the reason why I want to go short the oil price. I think we will head back down towards just below the psychological $60 mark. And you can see here, we've got really good support going back towards April of last year. So we're talking between $58 and $60 as a downside target.

Now, where's our stop? As you know, our stop is always very important. Well, if we want to go short here, and just in case that geopolitical tensions continue to be quite high, we want to have a relatively wide stop. I want to have it above these previous lows here (see the video), which could act as resistance going forward, and also these highs here going back to May and June. So my stop would probably be just above this 9th October high, at just around $66.40 on this Daily Financial Bet.

Previous week's trading outcome

And when we look at last week's "Trade of the week", we went long the Dow Jones Industrial Average, as you can see here, at 48,230. Now what you can do is move your stop up to below the lows seen on Thursday. That way, you would make a percentage profit on there. You could cash it in now, in which case you're making around 2.4% profit on that trade. Or you could let it run and have still our target at 49,930 in your minds.

This week's trade in summary

So this week's "Trade of the week" for me would be to go short the Brent crude oil price around $63 on the Daily Financial Bet, with a stop-loss around $66.40 and a downside target in the $59 range.