Very little has changed for crude oil in the last 24 hours. It moved back and forth and at the moment of writing these words, it's trading at about $24, which is above our entry level for the current long position.
However, its performance today has been rather disappointing compared to the main stock indices, where futures reached the circuit breaker level after rallying 5% overnight. Crude oil's performance has also been disappointing compared to gold, which moved close to $1,700.
The markets seem to be correcting, but crude oil is lagging within this correction. If it doesn't show strength shortly, we will close the current long position as soon as it seems that the correction in the general stock market is nearing its end (and we see that as with the S&P 500 close to 2650 currently).
For now, the binding profit-take level remains intact and so do our previous comments on it:
(...) In short, our target area for this rally is between $34 and $37, and we're conservatively going to place our profit-take level slightly below this area (in order to maximize the chance of getting the exit order filled).
This area is based on four resistance levels:
- The 38.2% Fibonacci retracement level
- The mid-March intraday high
- The mid-March high in terms of the closing prices
- The lower border of the huge price gap
Given the size of the size of the gap, it might be the strongest resistance here. This is yet another reason to place our exit a bit below it, and not at higher levels.
Summing up, the corrective upswing in crude oil appears to be underway, but we're growing suspicious of black gold's strength given today's relatively weak performance so far. We might close our long position even before it moves to our profit-take level.
Trading position (short-term; our opinion): Long positions in crude oil (100% size of the regular trading position) are justified from the risk to reward point of view with $33.97 as the binding profit-take level, and with $19.78 as the stop-loss level.
Thank you.
Nadia Simmons
Day Trading and Oil Trading Strategist
Przemyslaw Radomski, CFA
Editor-in-chief, Gold & Silver Fund Manager
