Trading position (short-term; our opinion): Short position with a stop-loss order at $62.24 and the next downside target at $55 is justified from the risk/reward perspective.

Whew, what a wild ride crude oil has been on yesterday. Fresh monthly lows and most of the daily losses retraced before the closing bell. A one-day phenomenon? Can either side muster more strength to move the market both meaningfully and lastingly? If so, is a move higher or lower more likely? We have a thing or two to say on that...

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

Crude oil has moved sharply lower yesterday, making our short position even more profitable. After hitting a fresh May low, black gold has finally caught a bid. The commodity rose not only above last week's lows, but also returned back inside the declining blue trend channel.

This way, crude oil has invalidated two earlier breakdowns. While this may seem bullish on the surface, let's remember that we have already seen something similar not so long ago. If not repeat, history can certainly rhyme this time, too.

Just take a look at today's price action - how soon has the breakout attempt above the 38.2% Fibonacci retracement evaporated. Such a swift reversal increases the likelihood of further deterioration targeting at least a test of the lower border of the blue declining trend channel in the very near future.

Summing up, the outlook for oil remains bearish. Yesterday's reversal from the fresh May lows looks bullish on the surface only as the bulls have been unable to build on their gains and maintain them earlier today. Black gold's rebound from the lower border of the declining blue trend channel and the dashed green support line is still in jeopardy. The weekly indicators and volume comparison continue to support lower prices and the daily picture concurs. The short position continues to be justified.

Trading position (short-term; our opinion): Profitable short position with a stop-loss order at $62.24 and the downside target at $55 is justified from the risk/reward perspective.

Thank you.

Nadia Simmons
Forex & Oil Trading Strategist