Trading position (short-term; our opinion): Short positions (with a stop-loss order at $54.21 and next downside target at $40) are justified from the risk/reward perspective.
On Thursday, crude oil extended losses and slipped to $41 as the bearish EIA report (which showed that U.S. crude oil inventories increased after nine consecutive weeks of declines) continued to weigh on investors’ sentiment. In this environment, light crude lost 1.86% and approached the200-day moving average. Will it manage to stop oil bears in the coming days?
Today’s alert is going to be quite short once again, because crude oil extended losses yesterday and remains on its way to our next downside target. On Thursday, the commodity broke not only under the 38.2% Fibonacci retracement (based on the entire Feb-Jun rally), but also below the 50-week moving average, which suggests further deterioration (even if the 200-day moving average pauses declines for very short period of time). Taking all the above into account, we believe that the comments that we made yesterday remain up-to-date also today and if you haven’t had the chance to read our previous Oil Trading Alert, we encourage you to do so today.
Thank you.
Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief
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