Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective.
On Tuesday, crude oil gained 1.27% and re-tested the major very short-term resistance. What conclusions can we draw from this price action?
Let’s analyze the chart below (charts courtesy of http://stockcharts.com).
Looking at the daily chart, we see that although oil bulls pushed the commodity higher during yesterday’s session, the proximity to the 38.2% Fibonacci retracement in combination with the very short-term blue resistance line based on the previous highs stopped them for a fourth time in a row, triggering a pullback in the following hours.
Taking this fact into account and combining it with the sell signal generated by the Stochastic Oscillator we continue to think that another move to the downside might be just around the corner.
How low could black go if the situation develops in line with the above assumption?
We believe that the best answer to this question will be the quotes from our last alert:
(…) If this is the case and black gold moves lower from current levels, we’ll see (at least) a re-test of the barrier of $50, the support area created by the 76.4% and the 78.6% Fibonacci retracements (marked with the green horizontal dashed lines (…)) or even the last week lows in the very near future.
Summing up, the overall situation in the short term remains almost unchanged as crude oil is trading in a narrow range between the barrier of $50 and the blue declining resistance line, which continues to keep gains in check since the beginning of the month. Nevertheless, oil bulls’ weakness in combination with the sell signal generated by the Stochastic Oscillator suggests that one more downswing and a re-test of the nearest supports might be just around the corner.
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
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