Bullish bias persists in crude oil futures, with resistance at $105.21 tested

Traders who are successful grasp the market's bullish or bearish inclination and typically aim to align their trades with that direction.

This does not preclude taking profits at important levels or occasionally trading counter to the trend. But when trading against the bias, having a precise understanding of where one is wrong is essential. Should the price break through a clearly set risk threshold and continue with the main trend, maintaining a counter-trend position is usually ill-advised.

The prevailing bias for crude oil futures remains bullish. Over just three weeks since August 26, the price advanced from roughly $80 to close to $105, a rise of about 31%.

However, since September 10 the price has been consolidating. The reason?

A distinct resistance and target zone exists around $105.21. Yesterday's peak was $104.95 before retreating. Sellers have tested that area three times, with stops presumably positioned above that level.

Traders who prioritize risk management aim to "risk a little to make more than a little." That is the goal successful traders pursue.

Do those sellers know the price will decline? No. They are hoping it will, yet hope is not a viable approach. The key is that they understand their point of being wrong, have defined their risk, and are ready to accept it if the market moves higher.

• What is the current prevailing bias?
• Where is the risk located and the rationale?
• What are the upcoming targets?
• How might traders use those levels to formulate a trade?