Trading position (short-term; our opinion): None positions are justified from the risk/reward perspective.

Although the current levels of the daily indicators clearly show that reversal is just around the corner, oil bears managed to push the price of black gold even lower during yesterday's session. What ca we expect in the following days?

Let’s take a look at the chart below (charts courtesy of http://stockcharts.com/).

The first thing that catches the eye on the daily chart is a small breakdown under the yellow support zone created by the 76.4% and 78.6% Fibonacci retracements and the April lows.

Despite this bearish development, oil bulls kept their cool blood and put as much strength as they can to push the price of black gold higher. Thanks to their determination the commodity came back above the April lows, invalidating the earlier small breakdown and closing the day inside the yellow area.

Is this a positive even? Yes – especially when we factor in the fact that the Stochastic Oscillator generated a buy signal timidly. In addition, the bullish divergence between the CCI and light crude deepened as there was no fresh low in the case of the value of the indicator (comparing only November values). On top of that, the RSI extended its drop below the level of 30, increasing the probability of reversal in the very near future.

If this is the case and the price of black gold goes higher from current levels, we’ll likely see an increase to the previously-broken md-August lows around $64.40-$64.50. Nevertheless, we think that staying on the sidelines and waiting for a confirmation/invalidation of the above assumptions seems to be the best decision justified from the risk/reward perspective. We’ll 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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