Trading position (short-term; our opinion): No position is justified from the risk/reward perspective.

The bulls finally stopped the decline yesterday, and are attempting now to close yesterday's bearish gap. Will they succeed, and if they don't, what will that mean exactly? What about the technicals, can a chart provide us with any valuable clues? Indeed, and we've identified one scenario that if realized, would lead to opening new trading positions.

Let's take a closer look at the chart below (chart courtesy of www.stooq.com ).

Although crude oil futures opened on Wednesday with the red gap, the bulls managed to stop the bears yesterday, and a rebound followed earlier today.

As a result, the bulls took futures above the upper border of yesterday's red gap, which suggests we could see it closed later today. Should we see the buyers in even more strength, the futures could test the previously-broken supports that serve as resistances right now. These resistances are the mid-July peaks and the upper border of the rising green trend channel.

If the bulls don't manage to break above them however, another attempt to move lower would not surprise us. This is especially the case when we factor in the current position of the daily indicators - the Stochastic Oscillator generated its sell signal, while the CCI is very close to doing the same.

Should we see reliable signs of the bulls' weakness, we'll consider opening short positions - small enough to account for this week's high volatility.

Summing up, the bulls stopped the slide yesterday, and rebounded earlier today. Perhaps the buyers will manage to close yesterday's red gap. If they succeed, the way to the mid-July peaks and the upper border of the rising green trend channel will be open. Should they fail, another move lower can be expected. This scenario is supported by the Stochastic's sell signal and by the CCI's approaching sell signal. In case of reliable signs of the bulls' weakness, we'll consider opening short positions.

Trading position (short-term; our opinion): No position 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.

Thank you.

Nadia Simmons
Forex & Oil Trading Strategist