Summary:

• Brent Oil back in the red after early rally
• Price had earlier reached its highest level in more than 2 years
• Market could be set for a pullback after strong run higher

The New Year began in a bullish way for oil markets with Brent Oil reaching its highest level since the summer of 2015 amidst large anti-government rallies in Iran and ongoing supply cuts led by OPEC and Russia. The market is now in the vicinity of the peak seen during 2015 around the $66-69 a barrel region and any reversal signals here could provide attractive short opportunities. 

 Brent has hit its highest level since summer 2015 today, boosted by political instability in Iran. Source: xStation

However, after the bright start there has been some notable selling back and price is now in the red on the day. An inverted hammer may be forming on a D1 chart and should this occur then a deeper correction may lie ahead. The market has enjoyed a strong run higher since making a low last June around the $44 handle and fib retracements of the rally could offer potential profit targets. The 23.6% at 61.86 and 38.2% at 58.50 are two levels to potentially keep an eye on. 

 A reversal signal may be forming on D1 with the market now lower on the day after earlier rising higher. Source: xStation

In addition to the possible resistance zone from 66-69 there is also an extreme level of long positioning seen amongst speculative traders. This could be seen as a contrarian signal for price to decline as any sell-off would gather momentum should longs have to exit their position in mass.