Trading position (short-term, our opinion; levels for crude oil’s continuous futures contract): long positions with entry at $68.50-69.00, with $65.50 as a stop-loss and $73.00 as a price target.

Crude oil was sold off early this week affected by the OPEC oil output increase news along with the strengthening dollar and stock market correction. On Tuesday, black gold fell to a short-term low of $65.01. It was below our position’s stop-loss level for a very short period of time. Therefore, we decided to keep the speculative long position intact. Price has bounced back to the $68 area since then.

Upward Reversal or Just a Sham?

The market has broken below its technical support level of $70-72 recently; today, oil is trading along the $68 price level. For now, it still looks like a correction within a medium-term uptrend. Oil price is trading close to its mid-May local highs, as we can see on the daily chart (the graph includes today’s intraday data):

Oil at an Important Support Level

The market has retraced all of its June advances in recent days. Oil price came back down to $66, re-testing its March and May local highs. So, it acted as a support level, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):

The weekly chart of the Light Crude Oil Continuous Contract is showing clearly negative technical divergences between the price and the indicators:

Conclusion

Crude oil broke below its month-long consolidation early this week, as it got below the $70 price mark. For now, it looks like a correction within a medium-term uptrend. The market continues to trade above the medium-term support level of $66. So, speculative long positions are still justified from the risk/reward point of view. However, if the market gets back below $65.50 again, we will close our position.

Today we will get the Crude Oil Inventories release at 10:30 a.m. It is expected to be at -4.6M barrels. Will we see a greater decline again? For context, last week the inventories fell by 7.9M barrels, which was a bullish sign – the actual number came in lower than expected.

As always, we’ll keep you, our subscribers, well-informed.

Trading position (short-term, my opinion; levels for crude oil’s continuous futures contract): long positions with entry at $68.50-69.00, with $65.50 as a stop-loss and $73.00 as a price target.

Thank you.

Paul Rejczak,

Oil Trading Strategist

Sunshine Profits: Effective Investments through Diligence and Care