Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective.
On Monday, crude oil lost 0.76% as Iran's Deputy Oil Minister’s commentary weighed on investors’ sentiment and pushed the price of the commodity lower. As a result, light crude slipped under $48 and approached the medium-term support line. Will it withstand the selling pressure in the coming days?
On Sunday, Iran's Deputy Oil Minister said that his country would increase crude oil exports to 2.2 million bpd by the middle of summer, which dampened expectation for a decision to freeze OPEC oil production at the next meeting in Vienna on June 2. In this environment, light crude extended losses and closed the day slightly above $48, approaching the medium-term support line. Will it withstand the selling pressure in the coming days? Let’s examine the daily chart and find out what can we infer from it (charts courtesy of http://stockcharts.com).
Looking at the above chart, we see that crude oil extended losses after the market’s open, which approached the commodity to the medium-term green rising line based on the Feb and Apr lows. This support encouraged oil bulls to act, which triggered a rebound in the following hours and light crude closed the day slightly above $48. In this way, the commodity invalidated earlier breakout above the Nov highs, which is a negative signal that suggests further deterioration – especially when we factor in the fact that the RSI, CCI and Stochastic Oscillator generated sell signals.
Nevertheless, the size of the move is still too small to say with full conviction that the recent rally is over. Therefore, in our opinion, we’ll see acceleration of declines if crude oil extends losses once again and drops under the medium-term green support line (based on the Feb and Apr lows), invalidating earlier breakout above the Apr highs (in this case, we’ll consider opening short positions).
Finishing today’s alert, we would like to emphasize that today's analysis is based solely on the above chart and differences in data in case of data providers still take place, making the overall picture of the commodity a bit unclear.
Summing up, crude oil gave up some gains once again and closed the day under the Nov intraday high, invalidating earlier breakout. Although this is a negative signal that suggests lower prices of the commodity, the Apr high and the medium-term support line (based on the Feb and Apr lows) continue to keep declines in check. Therefore, as long as there won’t be breakdown below them short-lived moves in both directions can’t be ruled out.
Very short-term outlook: mixed
Short-term outlook: mixed
MT outlook: mixed
LT outlook: mixed
Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective. We will keep you – our subscribers – informed should anything change.
Thank you.
Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief
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