Trading position (short-term; our opinion): No position is justified from the risk/reward perspective.

At first glance, oil went pretty much nowhere yesterday. First looks can be deceptive, however. Is this a pause after the run higher, or should we get ready for a shifting ground and balance of power between the bulls and the bears? Let’s present you with the latest technical picture now.

Let’s see the chart below (charts courtesy of http://stockcharts.com).

Looking at the daily chart, we see that although crude oil increased a bit after yesterday’s market open, this improvement was very temporary. The commodity moved lower in the following hours.

In the course of yesterday’s drop, the price of black gold tested the previously-broken upper border of the red rising trend channel and closed the day above it. Such price action suggests that Wednesday’s move could be a verification of the earlier breakout above the wedge.

If this is the case, we’ll likely see another attempt to move higher and another test of the strength of the 50-week moving average as seen on the weekly chart below.

Even if we see such development, we should remember these words of yesterday:

(…) bearish divergences between daily indicators and the price of black gold remain on the cards.

This is raising some doubts about further rally. Additionally, the weekly indicators remain in their overbought areas, increasing the probability of reversal in the coming days.

There’s also the 61.8% Fibonacci retracement based on the entire 2018-2019 downward move not far from current levels. It is an additional resistance and could encourage the bears to act in a very near future.

Trading position (short-term; our opinion): No position is justified from the risk/reward perspective.

Thank you.

Nadia Simmons
Forex & Oil Trading Strategist