Trading position (short-term; our opinion; levels for crude oil's continuous futures contract): No positions are justified from the risk-reward perspective.

The crude oil price hasn't been doing a lot in the last few days, after it reversed and we took profits from the previous long position. This might change shortly. The reason is the specific technical juncture, at which crude oil currently is.

Namely, black gold is right at its rising support line, while at the same time still below the resistance created by the previous May high. It's also relatively close to the April high of about $29, and the round resistance of $30 (which also corresponds to a major Fibonacci retracement level).

This means that crude oil will have to either break above the previous highs, or break below the rising support line, from which it just bounced. Which will happen? The jury is still out, but in our view, another downswing is more likely. Not likely enough to open a speculative short position right away, but likely enough to pay extra attention to the possibility of seeing a break out of the formation.

The rebound from below $10 was huge and if crude oil hasn't finished declining - just as the general stock market hasn't finished declining and the USD Index hasn't finished rallying - we might see another wave lower shortly. Should we see enough bearish confirmations, we will open a short position, but it's too early to do so now.

Summing up, it still seems that the right course of action is to wait on the sidelines, but if we see a decline here, it could change the outlook quite significantly because of the proximity to the rising support line.

Trading position (short-term; our opinion; levels for crude oil's continuous futures contract): No positions are justified from the risk-reward perspective.

Thank you.

Nadia Simmons
Day Trading and Oil Trading Strategist

Przemyslaw Radomski, CFA
Editor-in-chief, Gold & Silver Fund Manager