Trading position (short-term; our opinion): Profitable short positions with a stop-loss order at $71.34 and the next downside target at $66 are justified from the risk/reward perspective.
After several unsuccessful attempts to break through to higher levels, oil bulls finally meet the first important Fibonacci retracement during Wednesday's session. Was this meeting easy for them? Not really, because the price of crude oil turned back quite quickly to the south. Will oil bears use this opportunity to implement their pro-declining plans in the following days?
Let’s take a closer look at the charts below (charts courtesy of http://stockcharts.com).
Technical Picture of Crude Oil
Looking at the daily chart, we see that after several days oil bulls finally managed to reach the 38.2% Fibonacci retracement. Despite this climb, this first resistance triggered a pullback, which suggests that as long as it remains in the cards higher prices of black gold are not likely to be seen and one more move to the downside should not surprise us in the coming days.
If this is the case and the commodity reverses and declines from current levels, crude oil will likely not only hit a fresh July low, but also test the support zone created by the lower borders of rising trend channels (marked with the black ellipse) in the following days.
As a reminder, the long-term chart of crude oil continues to support the sellers and lower prices of black gold as crude oil is still trading under two previously-broken resistances. All details we presented yesterday:
(…) although crude oil bounced off the 200-month moving average earlier this month, the commodity remains under the previously-broken red resistance zone (created by the two important Fibonacci retracements) and the upper border of the green rising wedge.
This means that an invalidation of the earlier breakouts and its negative impact on the price of light crude are still in effect, suggesting that if we see a monthly closure below the above-mentioned resistances oil bears will get one more important reason to push black gold lower in the coming month(s).
Summing up, profitable short positions continue to be justified from the risk/reward perspective as the short-term outlook remains bearish, favoring oil bears and lower prices of crude oil.
Trading position (short-term; our opinion): profitable short positions with a stop-loss order at $71.34 and the next downside target at $66 are justified from the risk/reward perspective. We will keep you 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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