Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective.
Yesterday, crude oil moved one step higher, hitting a fresh 2018 peak. Positive sign? At first sight you we can say yes, but did this increase really change anything in the short-term picture of black gold?
Let's take a closer look at the charts below (charts courtesy of http://stockcharts.com).
From today’s point of view, we see that although crude oil moved higher yesterday, the commodity is still trading under the upper border of the blue rising wedge and the red rising resistance line based on the previous highs, which means that what we wrote in our last commentary on black gold is up-to-date also today:
(…) we believe that as long as there is no breakout above the upper border of the formation or a breakdown below the line of the wedge, another bigger move is not likely to be seen (until this time we will likely not decide to open any positions).
Nevertheless, taking into account bearish divergences and the current levels of the indicators (the CCI and the Stochastic Oscillator remains in their overbought areas almost since the beginning of the month), it seems that oil bears should finally show their claws in the coming week (maybe after reports on crude oil inventories).
Why bears not bulls? Because the way to the north is currently blocked by the major resistance zone created by the 50% Fibonacci retracement based on the 2011-2016 downward move and the 38.2% Fibonacci retracement based on the entire 2008-2016 decline (we marked it with the green ellipse on the long-term chart below), which continues to keep gains in check since the beginning of the month.
Summing up, the overall situation in the very short term remains too unclear to justify opening any positions now. However, if we see a breakdown under the lower border of the blue rising wedge, we’ll consider opening short positions.
Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective. We will keep you – our subscribers – informed should anything change.
Thank you.
Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief, Gold & Silver Fund Manager
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