Trading position (short-term; our opinion): No position is justified from the risk/reward perspective. In other word, closing short positions and taking sizable profits off the table is justified from the risk/reward perspective.

Yesterday, we wrote:

(...) Although crude oil futures moved higher after Wednesday's open and broke above the previous peaks, this improvement was very temporary, and the bears took over in the following hours.

As a result, the futures came back below the lower border of yesterday's red gap, creating a very long upper shadow. This is clearly a bearish sign, suggesting further deterioration.

(...) Should it be the case and the futures extend losses from here, we'll likely see a decline to at least the nearest bullish green gap created in mid-December. This is where also the 38.2% Fibonacci retracement is, which together with the gap serves as the closest short-term support.

The situation indeed developed in tune with the above scenario, and crude oil futures declined sharply during yesterday's session to our downside target, making our short positions profitable.

Despite this drop, the gap remains open and the above-mentioned Fibonacci retracement continues to serve as a support. These suggest that we could see a rebound from here in the very near future. Therefore, closing short positions and taking sizable profits off the table (as a reminder, we opened them when crude oil futures were trading at around $62.80) is justified from the risk/reward perspective.

Nevertheless, should we see a successful drop below these supports, we'll likely reopen short positions. We may even reopen them at higher levels after the futures rebound. As always, we'll keep you - our subscribers - informed.

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

Thank you.

Nadia Simmons
Forex & Oil Trading Strategist