Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective.
On Friday, crude oil moved higher and climbed to the previously-broken short-term support/resistance line once again, but did this increase change anything in the overall picture of the commodity?
Let’s check the chart below and find out (charts courtesy of http://stockcharts.com).
On Thursday, we wrote the following:
(…) light crude (…) climbed to the barrier of $50. (…) we had similar situation in the previous week. Back then, crude oil also invalidated earlier breakdown under the blue support/resistance line and climbed above $50. Despite this improvement, oil bulls didn’t manage to hold gained levels, which resulted in a sharp decline on Friday. Taking this fact into account, we think that history will repeat itself once again and we’ll see another attempt to move lower. If this is the case, and light crude declines below the blue support line once again, we’ll see a re-test of the 50-day moving average (…) in the coming day(s).
From today’s point of view, we see that oil bears pushed the commodity lower as we had expected and crude oil approached the 50-day moving average on Friday. As you see, the proximity to this support encouraged oil bulls to act, which resulted in another rebound and a comeback to the previously-broken blue line. What’s next? Taking into account the proximity to the barrier of $50 and the fact that Friday’s move materialized on smaller volume (compared to what we saw in previous days), we think that another downswing is just around the corner. If this is the case and light crude declines from here, we’ll see another re-test of the 50-day moving average or even a test of the green support zone and recent lows in the coming day(s). If we see such price action, we’ll consider opening short positions (especially if the size of volume increases during downswings).
Summing up, the overall situation in crude oil hasn’t changed much as the commodity is still trading between the resistance area created by the barrier of $50 and the blue resistance line and the 50-day moving average and the green support zone. Therefore, in our opinion, as long as there won’t be breakout or breakdown another sizable move is not likely to be seen and short lived moves in both directions should not surprise us.
Very short-term outlook: mixed with bearish bias
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
Gold & Silver Trading Alerts
Forex Trading Alerts
Oil Investment Updates
Oil Trading Alerts
