Learn Forex: Trading Oils Daily Pricing Channel

Article Summary:Pricing channels provide excellent opportunities to trade support and resistance levels. As UKOIL moves toward resistance, traders look to implement fresh breakout entries lower toward support.

Pricing channels are an excellent way for support and resistance traders to take advantage of consolidating markets. UKOIL (Brent) is a great example in that it has been moving lower in a pricing channel since it created a high at 117.92 on September 14th. Resistance has been formed by connecting a series of highs in a trendline from the 14th including yesterday’s move to a lower high at 112.30.

As price turns from this resistance point, channel traders will look for a longer term move back to its daily line of support pictured below. Ultimately, trading price channels is very similar to implementing a traditional range based market approach. When price reaches resistance traders will look to sell. When price moves to support channel traders are inclined to buy. With this in mind let’s take a closer look at trading the UKOIL pricing channel.

Learn Forex – UKOIL Daily Channel

Learn_Forex_Trading_Oils_Daily_Pricing_Channel_body_Picture_2.png, Learn Forex: Trading Oils Daily Pricing Channel

(Created using FXCM’s Marketscope 2.0 charts)

Breakout Entries

Taking Price in to a 2Hour chart we can see UKOIL begin testing a short term support line. Price has been steadily increasing along this point since the creation of the standing low at 104.74. Now that price has moved off of daily resistance line mentioned in our previous chart, channel traders can look for a break of this short term level of support for new trade entries.

To place a breakout trade to lower lows on UKOil, price must decline below short term support. With this in mind traders may begin trading entries to sell UKOIL may be placed under 109.00. Conservative traders may opt to place entries outside of support as well as under the previous low. Currently our previous low resides at 108.43 on our 2hr supported trendline.

Learn Forex – UKOIL 2Hour Support

Learn_Forex_Trading_Oils_Daily_Pricing_Channel_body_Picture_1.png, Learn Forex: Trading Oils Daily Pricing Channel

(Created using FXCM’s Marketscope 2.0 charts)

Stops and Limits

Once entries are set for a breakout, traders need to find exit points for their trade. Traders may look to set their stop orders above the ascending support line on the graph below. In the event that price rises over this level, trades should be exited in order to find new entries as price ascends back to our primary resistance line on the daily chart. Limit orders can be easily identified in a pricing channel.

Alternative scenarios for UKOIL include a break above daily resistance, creating a potential bullish pennant continuation.

---Written by Walker England, Trading Instructor

To contact Walker, email wengland@fxcm.com. Follow me on Twitter at @WEnglandFX.

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Market Data

  • Currencies
    Currencies
    NamePriceChange% Chg
    1.2519+0.001+0.08%
    USDSGD=X
    1.7295+0.0013+0.07%
    EURSGD=X
    2.1019+0.0006+0.03%
    GBPSGD=X
    81.8203+0.0839+0.10%
    SGDJPY=X
    6.1939-0.005-0.08%
    SGDHKD=X
    2.5868-0.005-0.19%
    SGDMYR=X
    9,159.1924+16.1748+0.18%
    SGDIDR=X
    4.9683-0.0047-0.09%
    SGDCNY=X
    1.1672-0.0047-0.40%
    AUDSGD=X
  • Commodities
    Commodities
    NamePriceChange% Chg
    1,294.20-9.30-0.71%
    GCM14.CMX
    19.58-0.06-0.30%
    SIK14.CMX
    90.42-0.41-0.45%
    ^XAU
    3.05+0.03+0.91%
    HGK14.CMX
    104.21+0.45+0.43%
    CLK14.NYM
  • Bonds
    Bonds
    TreasuryYield (%)Yield Change
    1.73+0.08
    ^FVX
    2.72+0.08
    ^TNX
    3.52+0.06
    ^TYX

MARKET MOVERS

  • Most Actives
    Most Actives
    NamePriceChange% Chg
    0.115-0.002-1.71%
    B22.SI
    0.48+0.020+4.35%
    5GJ.SI
    2.27+0.090+4.13%
    5ME.SI
    2.190.0000.00%
    JS8.SI
    0.61+0.005+0.83%
    E5H.SI
  • % Gainers
    % Gainers
    NamePriceChange% Chg
    0.162+0.034+26.56%
    5GF.SI
    0.20+0.034+20.48%
    5WD.SI
    0.59+0.050+9.26%
    L5I.SI
    0.28+0.020+7.69%
    C33.SI
    0.215+0.015+7.50%
    5UE.SI
  • % Losers
    % Losers
    NamePriceChange% Chg
    0.103-0.010-8.85%
    5OS.SI
    0.112-0.008-6.67%
    5RC.SI
    0.355-0.025-6.58%
    KJ9.SI
    0.215-0.015-6.52%
    F9M.SI
    0.29-0.020-6.45%
    5PC.SI