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

After Tuesday’s market open oil bears took control and pushed black gold below the mid-January highs. Despite this decline, yesterday's closing price softened the undertone of the earlier drop. Why?

Let’s take a look at the daily charts to find out (charts courtesy of http://stockcharts.com).

From today’s point of view, we see that oil bears pushed the price of crude oil below the mid-January peaks, which looks like an invalidation of the earlier breakout above them. This is the right conclusion, but it is only true if we take into account intraday peaks.

Nevertheless, when we consider the entire price action in the terms of daily opening and closing prices, we see that black gold closed yesterday’s session above the January 16 opening price, which means that the invalidation had no place.

Regardless of these considerations, we must remember that the sell signal generated by the Stochastic Oscillator remains in the cards. Additionally, the RSI and the CCI also generated negative signals, giving oil bears another reason to act.

However, taking into account the uncertainty about today's report on crude oil and its products inventories (and potentially high variability), we decided to wait with the opening of short position until the data release.

Finishing today’s alert please note that if we see a big red candle materialized on significant volume, we’ll consider opening short position.

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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