Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective.
On Friday, crude oil gained almost 3%, which resulted in a climb to important short-term resistance line. Will it manage to stop oil bulls in the coming week?
Let’s take a closer look at the very short-term chart and find out what can we infer from it (charts courtesy of http://stockcharts.com).
On Friday, we wrote the following:
(…) the commodity extended losses and reached our first downside target. What’s next? (…) this support area may trigger a rebound (to the previously-broken 50% retracement or even the upper black resistance line around $45)
Looking at the daily chart, we see that crude oil moved higher on Friday as we had expected. Thanks to this increase, the commodity climbed above our first upside target and approached the upper border of the declining trend channel. What does it mean for light crude? In our opinion, such increase looks like a verification of earlier breakdown below the black upper line, which suggests that reversal and lower values of crude oil are just around the corner – especially when we factor in sell signals generated by the indicators.
Therefore, if light crude declines once again, our downside target from Thursday’s alert would be in play:
(…) given the breakdown and invalidation of breakout above several levels yesterday, it seems that crude oil could slide all the way back to the rising black support line at about $40 - $41.
Summing up, crude oil bounced off the green support zone, which resulted in a comeback to the previously-broken upper border of the black declining trend channel. Taking into account the proximity to this resistance and sell signals generated by the indicators, we think that lower values of the commodity are just around the corner.
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 Fund Manager
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