Trading position (short-term; our opinion): Short positions with a stop-loss order at $77.44 and the initial downside target at $67.95 are justified from the risk/reward perspective.

Yesterday’s session finished several cents above the previously-broken upper border of the rising trend channel. Can we consider this event as an oil bulls' success? In our opinion, we can’t. Why?

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

Technical Picture of Crude Oil

Looking at the daily chart, we see that the overall situation in the very short term (not to mention a short term or a broader perspective) remains almost unchanged as black gold is still trading around the upper line of the red rising trend channel (based on intraday lows and highs).

Yesterday’s session finished several cents above it, but it’s hard to consider such price action as any success – especially when we factor in the fact that the proximity to the upper lines of the other two rising trend channels (marked with blue and red dashed lines) was enough to stimulate oil bears to act and trigger a pullback.

Additionally, the price of light crude created another doji candlestick on the daily chart, which increases uncertainty among investors about the direction of the next move. Despite this fact, all pro-declining factors about which we wrote in our previous alerts remain in the cards, supporting oil bears and lower prices of black gold in the coming days.

Therefore, not wanting to waste your precious time, we will not re-write them now, only post links to Friday’s and yesterday's alerts, in which you will find all the necessary details. If you haven’t had the chance to read both Oil Trading Alerts, we encourage you to do so today:

Crude Oil and Its Another Interesting Relationship

Crude Oil – Similarities to the Past

Finishing today’s Oil Trading Alert, we would like to add that the current situation in crude oil is becoming more and more similar to what we could observe in May (we marked both periods with black ellipses on the above chart), because despite oil bulls’ attempts to go higher, they are not able to break above the upper borders of the blue and the red (marked with dashed lines) rising trend channels.

As a reminder, a similar weakness in May preceded a bigger short-term downward move, which in combination with all pro-bearish signals from our previous alertsfurther increases the likelihood that the next significant move will be to the south.

Summing up, short positions continue to be justified from the risk/reward perspective as crude oil verified the earlier breakdown under the upper line of the rising trend channel (based on an intraday highs and lows) once again, increasing the probability of another downswing. Additionally, all daily indicators support oil bears at the moment of writing this alert, which suggests that lower prices of black gold are just around the corner.

Trading position (short-term; our opinion): Short positions with a stop-loss order at $77.44 and the initial downside target at $67.95 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