Trading position (short-term; my opinion; levels for crude oil’s continuous futures contract): No positions are currently justified from the risk/reward point of view.
Crude oil retraced some of its decline of $6 or 8% from Tuesday’s new medium-term high ($76.98), as it gained 0.74% yesterday. Earlier this week, the black gold rallied following the failed OPEC+ output deal. However, on Thursday, the U.S. Crude Oil Inventories release pushed oil price above $73. The inventories fell 6.7 million barrels, extending their six-week-long streak of rapid declines. In addition, gasoline supplies have slid the most since March. So, no wonder that crude oil price gained 0.74% yesterday.
Oil Bounce - Will it Resume the Uptrend?
Today oil is trading slightly higher, remaining above the $73 price level. The market has bounced from its technical support level of $70-72. Nonetheless, the technical picture is not rosy for the oil bulls. So far, the bounce is just an upward correction of the decline following the OPEC+ failed deal news.
For context, a month-long uptrend has been broken to the downside, as we can see on the daily chart (the graph includes today’s intraday data):
Breaking Lower in the Long Term
Crude oil has broken above its pre-Covid price levels recently – the market has come back from last year’s historical plunge in April. Since May we have seen an acceleration of the uptrend, but this week’s decline may be seen as a negative medium-term signal.
The weekly chart of the Light Crude Oil Continuous Contract is also showing clearly negative technical divergences between the price and the indicators (chart by courtesy of http://stockcharts.com)
Conclusion
Crude oil has suffered an 8% decline from its new medium-term high this week. The market may be shifting, and it is possible that we are witnessing a medium-term reversal to the downside. Yesterday the market retraced some of its short-term decline following the U.S. Crude Oil Inventories release, but it looks like nothing more than an upward correction or a consolidation. Thus, no short-term positions are justified from the risk/reward point of view.
As always, we’ll keep you, our subscribers, well-informed.
Trading position (short-term; my opinion; levels for crude oil’s continuous futures contract): No positions are currently justified from the risk/reward point of view.
Thank you.
Paul Rejczak,
Oil Trading Strategist
Sunshine Profits: Effective Investments through Diligence and Care
