Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective.
Although black gold extended gains and hit a fresh high on Thursday, oil bears came back and triggered a pullback in the following hours, which erased entire earlier increase. Is it possible that oil bulls lost their strength and higher prices of light crude are not ahead of us?
Let’s take a look at the charts below (charts courtesy of http://stockcharts.com).
From today’s point of view, we see that the overall situation in the long term hasn’t changed much, because crude oil is still trading slightly above the previously-broken 200-month moving average.
Will we see a test of the barrier of $70 in the coming week? Let’s examine the daily chart.
In our last Oil Trading Alert, we wrote the following:
(…) yesterday’s upswing materialized on significant volume, which together with the above-mentioned breakout above the 200-month moving average and the buy signal generated by the Stochastic Oscillators suggests that we’ll see a test of the upper border of the blue rising trend channel in the coming days.
As you see on the above chart, although oil bulls did what they could, the price of crude oil reversed slightly below the upper line of the blue rising trend channel. Such price action indicates oil bulls’ weakness and suggests further deterioration – especially when we factor in clearly visible strong bearish divergences between all daily indicators and the price of the commodity.
Nevertheless, to be more confident that our positions will be profitable we will wait for the weekly closure and its overtones before deciding to open short positions.
As always, we’ll keep you - our subscribers - informed should anything change, or should we see a confirmation/invalidation of the above.
Thank you.
Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief, Gold & Silver Fund Manager
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