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

Wednesday’s session showed oil bulls’ strength and their determination to fight for higher prices light crude. Thanks to their action, the commodity invalidated another breakdown under medium-term support and climbed above Fibonacci retracements. What can stop them in the coming days?

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

Technical Picture of Crude Oil

In our Wednesday's alert, we wrote the following:

(…) we should keep in mind that the CCI and the Stochastic Oscillator generated the buy signals, increasing the likelihood of another move to the upside in the very near future.

From today’s point of view, we see that oil bulls finally showed strength and invalidated the earlier breakdown under the medium-term blue line and climbed above the black dotted resistance line.

Additionally, the commodity broke above the 38.2% and 50% Fibonacci retracements, which approached the price to the resistance area created by the next retracement, the mid-August peak and the 38.2% Fibonacci retracement based on the entire July-August decline.

As it turned out after today’s market open, this solid resistance area was strong enough to stop the buyers and trigger a pullback, which suggests that we could see a test of the previously-broken retracements or even a verification of yesterday’s breakout above the medium-term blue line in the following days.

Nevertheless, we should keep in mind that Wednesday’s increase materialized on higher volume and the buy signals generated by the daily indicators remain in the cards, which suggests that even if the price of black gold goes little lower, oil bulls will try to break above these resistances in the near future – maybe even at the beginning of the coming week.

If they succeed, we’ll likely open long positions.

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

Thank you.

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

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