Trading position (short-term; our opinion): Profitable short positions with a stop-loss order at $73.10 (please note that we moved our stop-loss order higher) and the next downside target at $66 are justified from the risk/reward perspective.
During today’s pre-market trading oil bulls took crude oil above the barrier of $70, but will the commodity stay above it for longer?
Let’s take a closer look at the charts below (charts courtesy of http://stockcharts.com).
Technical Picture of Crude Oil
Looking at the daily chart, we see that crude oil moved lower on Friday, which resulted in a drop to the lower border of the very short-term black rising trend channel.
Nevertheless, earlier today, this support line encouraged oil bulls to trigger a rebound, which you can see more clearly on the 4-hour chart below.
As you see, today’s upswing not only erased Friday’s drop, but also took light crude above the 38.2% Fibonacci retracement. Such price action suggests that we’ll likely see a test of the upper line of the trend channel, which currently intersects the red horizontal resistance line based on the July 13 high.
However, slightly above them, there is also the 50% Fibonacci retracement, which together with the above-mentioned resistances will likely activate oil bears. If the situation develops in line with the above assumption, we’ll likely see another reversal and another test of the lower border of the very short-term black rising trend channel marked on the daily chart in the very near future.
Summing up, profitable short positions continue to be justified from the risk/reward perspective as the short-term outlook remains bearish (despite today’s pre-market rebound), favoring the sellers and lower prices of crude oil in the coming week(s).
Trading position (short-term; our opinion): Profitable short positions with a stop-loss order at $73.10 (please note that we moved our stop-loss order higher) and the next downside target at $66 are justified from the risk/reward perspective.
Thank you.
Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief, Gold & Silver Fund Manager
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