Trading position (short-term; our opinion): Short position with a stop-loss order at $57.86 and the initial downside target at $53.28 is justified from the risk/reward perspective.

Let's dive into the chart below (chart courtesy of www.stooq.com ) to find out where crude oil price is headed next.

The daily chart shows the previously broken red zone that serves now as support. This is where prices rebounded from yesterday, closing above the upper border of the rising green trend channel.

The futures' invalidation of the earlier small breakdown below this support, is a positive sign for the bulls. Despite this improvement, they however didn't manage to hold on to their gains, and prices attempted to move lower once again before today's market open.

Additionally, the sell signals generated by the CCI and the Stochastic Oscillator remain on the cards, supporting the sellers and further deterioration in the coming day(s). This is especially so when we remember about the tiny gap between yesterday's open and Monday's close still being open.

What could happen if the futures extend declines from here?

In our opinion, we'll see not only a test of the lower border of the very short-term rising blue trend channel, but maybe even a drop to the lower border of the green channel in the following days - yes, that's below our initial downside target.

Summing up, the short position continues to be justified from the risk/reward perspective as crude oil futures moved lower, increasing the probability of an invalidation of the earlier breakout above the upper border of the rising green trend channel. If the situation develops in tune with this scenario, the way to yesterday's low will be open.

We hope you enjoyed reading the above free analysis, and we encourage you to read today's Oil Trading Alert - this analysis' full version. It includes more details about our current positions and levels to watch. There's no risk in subscribing right away, because there's a 30-day money back guarantee for all our products, so we encourage you to subscribe today.

Trading position (short-term; our opinion): Short position with a stop-loss order at $57.86 and the initial downside target at $53.28 is justified from the risk/reward perspective.

Thank you.

Nadia Simmons
Forex & Oil Trading Strategist