Trading position (short-term; our opinion): Short position with a stop-loss order at $60.22 and the initial downside target at $50.38 in crude oil is justified from the risk/reward perspective.
The full saying goes like “It’s as interesting as watching paint dry”. Crude oil price apparently hesitated yesterday. Easily looks like a pause in the current… uptrend, downtrend or consolidation? One could be forgiven for being not clear if they didn’t know where to look. We do know and would like to share the answer with you now.
Let’s take a closer look at the chart below (chart courtesy of http://stockcharts.com).
Yesterday, we wrote:
(…) Today’s upswing (oil changes hands at around $56.25 currently) remains likely to be muted, compared to the Friday’s ride.
Our observations proved to be correct. Setting yesterday’s failed upside move aside (as it was done not on a meager volume, it further adds a bearish tone to the picture), please note yet again the previous significant upper knot – it validates the suspected weakness of the bulls. We have seen a similar white candle four days ago and examine for yourself how the situation resolved then. We are seeing the history being repeated also today – black gold just pierced the $56.00 level at the moment of writing these words.
Focusing on the most prominent features of our chart analytical toolbox now, oil is still trading below two nearest resistances: the purple resistance zone and the rising red resistance line. We have marked for your convenience the current blue consolidation zone that oil price hasn’t yet left on a closing basis.
Summing up, short positions continue to be justified from the risk/reward perspective as the bears have many factors on their side - recent tiny breakout invalidations, price trading beneath important resistances, the bearish volume implications and the bearish positioning of the daily indicators. All these favor the sellers and another move to the downside in the nearest days.
Trading position (short-term; our opinion): Short position with a stop-loss order at $60.22 and the initial downside target at $50.38 in crude oil is justified from the risk/reward perspective.
Thank you.
Nadia Simmons
Forex & Oil Trading Strategist
