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

On Tuesday, the price of crude oil climbed above two important resistances. For a short time, it even seemed that we would see an invalidation of the breakdown under the medium-term line. But the bulls’ plans were thwarted by their rivals and the price of black gold turned back. What does it mean for the commodity?

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

Technical Picture of Crude Oil

Quoting our Oil Trading Alert posted on Monday:

(…) in our opinion, as long as crude oil is trading above the green support zone, which is also reinforced by the 61.8% Fibonacci retracement and the 200-day moving average, a sizable move to the downside is not likely to be seen – especially when we factor in the proximity to the lower border of the green rising wedge seen on the monthly chart (…)

In other words, a reversal from this area should not surprise us in the coming days – especially if the CCI and the Stochastic Oscillator manage to generate buy signals.

From today’s point of view, we see that although crude oil extended earlier gains during yesterday’s session, the overall situation in the short term remains almost unchanged.

As you see, black gold climbed above the previously-broken blue support/resistance line and the black dotted resistance line, but as it turned out this improvement was very temporary.

Why? At the first glance, because oil bulls didn’t manage to break above the 38.2% Fibonacci retracement. Such show of weakness attracted their opponents to the trading floor and resulted in a pullback that took the price of light crude back below both mentioned lines.

In this way, crude oil invalidated the earlier tiny breakouts, which doesn’t look appealing from the buyers’ point of view. Nevertheless, 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.

If this is the case, and we finally see an invalidation of the breakdown under the blue line and a breakout above the black dotted line, we’ll consider opening 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

Gold & Silver Trading Alerts
Forex Trading Alerts
Oil Investment Updates
Oil Trading Alerts