Trading position (short-term; our opinion; levels for crude oil's continuous futures contract): Full (100% of the regular position size) speculative short positions in crude oil are justified from the risk to reward point of view stop loss $45.63 at and $30.22 as the initial target price.
Crude oil just moved higher and it moved above the June highs. Does it change the outlook?
In short - not yet.
Crude oil moved above the June highs just slightly and it also closed above the lower border of the March price gap very slightly. This is a bullish phenomenon, but at the same time, nothing like that happened in terms of the daily closing prices.
Crude oil is attempting to move above the March price gap, but so far didn't manage to close the day below the last pre-plunge close of March. So, should the move that we see today end above the March pre-plunge low, we would say that the price gap was closed and that the resistance provided by its upper border was overcome.
But it's too early to do that right now. And even if that happens, there's a combination of two resistance levels just ahead - the early-March low and the previously broken rising resistance line.
Our stop-loss level is slightly above $45, which means that it's above both above-mentioned resistance levels. If they are broken in a meaningful manner, the SL order would take you out of the market - and correctly so, as it would imply that the outlook is no longer nearly as bearish as it is right now. This hasn't happened yet. In fact, even the March price gap was not "really" closed, because it was not closed in terms of the daily closing prices.
Consequently, in our opinion, keeping the short position intact remains justified from the risk to reward point of view.
Summing up, the short-term outlook for crude oil is bearish based on both the technical indications (in particular, because of crude oil's short-term breakdown and its verification) and on the rapidly increasing Covid-19 cases in the U.S., and we see signs that the bigger decline is likely to finally start.
As always, we'll keep you - our subscribers - informed.
Trading position (short-term; our opinion; levels for crude oil's continuous futures contract): Full (100% of the regular position size) speculative short positions in crude oil are justified from the risk to reward point of view stop loss $45.63 at and $30.22 as the initial target price.
In case of the futures contracts that are more distant than the current contract, we think that adding the premium (difference between the July and other contracts) to both: stop-loss and initial target prices is justified.
Thank you.
Nadia Simmons
Day Trading and Oil Trading Strategist
Przemyslaw Radomski, CFA
Editor-in-chief, Gold & Silver Fund Manager
