Trading position (short-term; our opinion): Short positions (with a stop-loss order at $56.45 and an initial downside target at $45.81) are justified from the risk/reward perspective.

Let’s examine the charts below to find out (charts courtesy of http://stockcharts.com).

Yesterday, we wrote:

(…) crude oil futures rebounded sharply earlier today, which suggests that the commodity will also move higher after the market’s open. In this case, we may see another re-test of the upper border of the black rising trend channel and the red resistance zone.

From today’s point of view, we see that the situation developed in line with the above scenario and crude oil re-tested the key resistance levels. Despite yesterday’s increase, the upper border of the black rising trend channel and the red resistance zone continue to keep gains in check.

Additionally, above this area (around $56) is also the upper border of the medium-term green rising trend channel, which successfully stopped oil bulls in October, December and January. This means that even if crude oil moves higher once again, the strong resistance is very close, suggesting that lower prices are just around the corner and short positions are justified from the risk/reward perspective.

Very short-term outlook: berish
Short-term outlook: mixed with bearish bias
MT outlook: mixed
LT outlook: mixed

Trading position (short-term; our opinion): Short positions (with a stop-loss order at $56.45 and an initial downside target at $45.81) are justified from the risk/reward perspective. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.

As a reminder – “initial target price” means exactly that – an “initial” one, it’s not a price level at which we suggest closing positions. If this becomes the case (like it did in the previous trade) we will refer to these levels as levels of exit orders (exactly as we’ve done previously). Stop-loss levels, however, are naturally not “initial”, but something that, in our opinion, might be entered as an order.

Thank you.

Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief, Gold & Silver Fund Manager

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