Trading position (short-term; our opinion): Already profitable short position with a fresh stop-loss order at $58.41 and the next downside target at $53.50 is justified from the risk/reward perspective.

With Friday's oil gain almost fully erased by now, where next for black gold? Is it about to roll over to the downside again? Have we been right in pointing out early Friday that the decline might very well be far from over? Let's find out.

We'll take a closer look at the chart below (chart courtesy of www.stooq.com ).

The overall situation in the very short term hasn't changed much as crude oil futures are still trading between Friday's peak and low.

Nevertheless, the futures opened Monday's session with a bearish red gap, which together with the bulls' weakness on Friday and the sell signals of the daily indicators suggests lower oil prices in the near future. The bulls were unable to push oil prices even to the 38.2% Fibonacci retracement despite Friday's green bullish gap - this doesn't bode well for higher prices.

How low can the bears aim? Their first downside target will be around $53.50, which is where the June 19 low is. If that's broken, they could look to test the lower border of the red declining trend channel in the coming week (currently at around $53).

Summing up, while crude oil bulls have on Friday repaired some of the earlier damage, oil futures are pointing down today, with Friday's gains almost fully erased already. Continuation of the downside move is supported by the Stochastic Oscillator's sell signal. Keeping the profitable short position open is therefore warranted.

Trading position (short-term; our opinion): Profitable short position with a fresh stop-loss order at $58.41 and the next downside target at $53.50 is justified from the risk/reward perspective.

Thank you.

Nadia Simmons
Forex & Oil Trading Strategist