Trading position (short-term; our opinion): short position with a stop-loss order at $58.87 and the exit target at $53.05 is justified from the risk/reward perspective.

The bulls have positively surprised yesterday, taking black gold to a bunch of important resistances. Earlier today, they've been rather hesitant in tackling them decisively though. Or do they still have some power left? Today's crude oil inventories will provide the next move's catalyst, but which way exactly?

Let's take a closer look at the charts below (charts courtesy of www.stooq.com ).

Yesterday's oil upswing closed the bearish red gap that was created at the beginning of this week. While this is a bullish development, the oil futures approached the red resistance zone created by its previous peaks and further reinforced by the 61.8% Fibonacci retracement. And these obstacles have been strong enough to stop the bulls several times in the past already.

Additionally, this is close to the declining red resistance line. On top of that, the futures also moved to the upper border of the purple declining trend channel as seen on the 4-hour chart below.

Earlier today, the buyers had visible problems breaking above this resistance, which increases the probability that we'll see another reversal from here in the very near future.

Should we indeed see that, the lower border of the trend channel and our downside target will be in play in the following days.

Summing up, yesterday's oil rebound has closed an earlier bearish gap, and has also reached several important resistances. These have proven to be the bulls' undoing in the recent past. Taking into account the bulls' issues as seen on the very short-term 4-hour chart, the short position remains justified.

Trading position (short-term; our opinion): short position with a stop-loss order at $58.87 and the exit target at $53.05 is justified from the risk/reward perspective.

Thank you.

Nadia Simmons
Forex & Oil Trading Strategist