Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective.
On Monday, oil bears thwarted pro-growth plans of their opponents once again and erased almost 58% of Friday’s upswing. Such up and downs moves suggest that both sides of the market test support and resistance areas before a massive attack. Earlier today, the sellers showed greater activity, but let's not praise the day before sunset.
Let’s take a look at the charts below (charts courtesy of http://stockcharts.com).
In our last Oil Trading Alert, we wrote the following:
(…) black gold is still trading under the last week high. Additionally, the volume, which accompanied Friday’s increase was visibly lower than day earlier, which suggests that the potential to growth may already be exhausted.
On top of that, it seems to us that the daily indicators are just waiting only for the next oil bears’ attack to generate sale signals and help them to push the price of the commodity down.
Looking at the daily chart, we see that the situation developed in line with the above scenario and the Stochastic Oscillator generated the sell signal after yesterday’s decline. As a result, black gold re-tested the green support area created by the January 11 and January 16 highs.
Earlier today, the price of the commodity extended losses and slipped under this zone, which suggests further deterioration. Nevertheless, we will not praise the day before sunset and wait for volume, closing price and the reactions of other indicators.
If we see an invalidation of the breakout above the early January peaks and the 200-month moving average confirmed by a big red candle materialized on significant volume, we’ll consider opening short position.
As always, we’ll keep you - our subscribers - 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
