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

On Thursday, crude oil moved a bit higher once again, but when can we expect a confirmation of the increase in the strength of the bulls?

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

Looking at the medium-term chart, we see that the overall situation hasn’t changed much as the commodity is still trading above the previously-broken 61.8% Fibonacci retracement and the green support zone.

Therefore, if the bulls manage to hold these levels and close the week above them, the probability of further improvement will increase a bit more.

Are there any short-term factors that can support the buyers during today’s session? Let’s examine the daily chart to find out.

From this perspective, we see that although crude oil bounced off Wednesday’s low during recent session, the commodity is still trading under the previously-broken February low and the lower border of the short-term red declining trend channel.

Taking these facts into account, we think that as long as there is no comeback above these lines all upswings will be nothing more than a verification of the earlier breakdowns. In other words, one more attempt to move lower can’t be ruled out – especially when we factor in the size of volume, which didn’t increase despite oil bulls’ upswings during recent sessions.

Earlier today, the commodity increased once again, suggesting that we’ll see a test of the above-mentioned resistances later in the day. In our opinion, the attitude of the buyers in this area will be very significant for the price of black gold next week.

Why? Because if the bulls manage to invalidate the above-mentioned nearest resistances, we’ll likely see further improvement in the coming week. How high could the commodity go if the situation develops in line with this assumption? We think that light crude will test the 38.2% Fibonacci retracement based on the October 29 – November 13 downward move and the upper line of the red declining tend channel seen on the daily chart.

However, on the other hand, if the bulls fail, we can see a test of the strength of the recent lows and the supports marked on the weekly chart.

Connecting the dots, we continue to believe that waiting at the sidelines is justified from the risk/reward perspective at the moment.

Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective, but if we see a confirmation of oil bulls’ strength, we’ll consider opening long positions. On the other hand, if the bears manage to push the price of black gold under this week’s lows, we’ll consider going short. 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

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