Trading position (short-term; our opinion): No position in crude oil is justified from the risk/reward perspective.
Oil bulls are making up today for yesterday's disappointing performance. How far will their efforts carry them? Is there any change on the horizon in the key obstacles in their way? Judging the path ahead, we'll take an objective look together.
Let's take a closer look at the chart below (charts courtesy of http://stockcharts.com).
Yesterday, the oil price has moved lower and closed the day below the previously-broken upper border of the red rising wedge. This way, the commodity had invalidated its earlier breakout above this line once again. Combined with the sell signals generated by the daily indicators and the proximity to the major short-term resistance zone, it increases the probability of further deterioration in the coming days. The decreased daily volume is the only cautionary sign of yesterday's decline.
How low could light crude go?
If the commodity indeed moves lower from here, the first downside target will be the lower border of the red wedge. If that is broken, the way to the first green support zone (created by the late-March lows) would open.
Summing up, the odds still favor a downside move. The key reasons are: the sell signals by the daily indicators and the oil price still trading being below the red resistance zone.
Trading position (short-term; our opinion): No position in crude oil is justified from the risk/reward perspective. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
On an administrative note, due to the Easter holidays and the travel schedule involved, we will not provide regular Alerts tomorrow (Friday; the US markets are closed anyway, so the trading is likely to be limited) and on Monday. The Alerts will be published normally, starting on Tuesday, April 23rd. Naturally, if anything urgent happens, we will keep you updated through quick intraday Alerts.
Thank you.
Nadia Simmons
Forex & Oil Trading Strategist
