Trading position (short-term; our opinion; levels for crude oil’s continuous futures contract): Short positions with $67.62 as stop-loss and $44.12 as initial price target as justified.

Crude oil just moved visibly higher and it moved through the level that triggered opening a short position in the price of the black gold. Consequently, we now have an open short position. The size of the rally might be discouraging, but please note that crude oil is currently at the levels that stopped its rally twice in the previous years: in 2020 and 2019.

Crude oil has been rallying without a more visible decline for months and no market can move up or down without periodic corrections. This, by itself, is not yet a reason to expect prices to decline, but that’s not the only reason that we have. The very existence of the strong resistance provided by two yearly highs is an important reason for one to expect a decline from either the current levels, or from nearby ones.

The other reasons are not visible on the above chart, as they come from other markets. Crude oil is not 100% linked with any other market, but it does tend to move in tune with the general stock market and against the USD Index. After all, it’s priced in the U.S. dollar.

Now, the medium-term trend in the USD Index has almost certainly reversed, and it might have also reversed in case of the general stock market. Consequently, crude oil’s chances for breaking higher here seem pretty slim. Instead, a reversal and a decline seem very likely.

To summarize, we’re preparing to open speculative short positions in crude oil, as it seems that the days of its rally are numbered.

As always, we’ll keep you, our subscribers well informed.

Trading position (short-term; our opinion; levels for crude oil’s continuous futures contract): Short positions with $67.62 as stop-loss and $44.12 as initial price target as justified.

Thank you.

Przemyslaw Radomski, CFA
Founder, Editor-in-chief