Heating Oil

Heating Oil confirmed a double bottom pattern yesterday on the May contract with a close above 1.5428.  Entry price is @ 1.5429 with stops ~ 1.5085.  Conservative target is @ 1.5875 (75% of pattern obj) and aggressive target @ 1.6024 (100% of pattern obj).  Supporting this double bottom, there is bullish divergence on the RSI and a bullish crossover on the MACD.  We also were able to close above the 10 and 20 DMA's.  The next upside resistance is @ 1.5579 (MS2) and @ 1.5680 (Fib 261).  Underlying support should be found at the volume @ price area between 1.5149 and 1.5075.

This pattern, by itself, shapes up nicely.  But, what makes it even more interesting is the bigger pattern that could be developing with it.  This double bottom pattern formed right in a MM Pullback Zone between 1.5187 and 1.5007.  This pullback area relates back to a dominant MM pattern shown on the weekly chart with a neutral retracement.  Anything less than 50% indicates a healthy uptrend.  The projected MM target is 1.8875.  So, we have an opportunity for a low risk, high reward set-up going with the recent uptrend shown on the weekly chart.  In addition to trading the double bottom pattern, you could also go long @ 1.5429 with stops @ 1.4824.  Conservative target would be @ 1.7122 with an aggressive target @ 1.777.  Both have reward:risk ratios above 2.50.  Finally, a much larger long term trade could be made with entry @ 1.5429.  Stops would be placed @ 1.3616 with the target @ 1.8875 for a nice 2.90 reward:risk ratio.  Although this last trade is probably too large for the average trader, it's worth keeping an eye on longer term.