Trading position (short-term; our opinion): No positions are currently justified from the risk/reward perspective.
Crude oil has been moving back and forth in the past few weeks and nothing really changed in the outlook. What was likely at the beginning of September is still likely today. In the September 1 Oil Trading Alert, we wrote the following:
How low can crude oil go? The next support level is provided by the 61.8% Fibonacci retracement level, but given the breakdown and invalidation of breakout above several levels yesterday, it seems that crude oil could slide all the way back to the rising black support line at about $40 - $41. As always, we’ll keep you – our subscribers – updated.
The key support level is now closer to the $41 level, but nothing really changed except for that. The crude oil price is after a breakout (above the declining trend channel) and after a breakdown (below the rising support line) and the implications cancel each other out. The final effect is neutral and neither a long or short position seems to be justified – the risk associated with any of them doesn’t seem worth it.
Now, we could see some sings that are either very bullish or very bearish, before crude oil moves to $41 and in this case we would likely open a position at prices higher than $41, but it’s too early to do so today. As always, we’ll keep you – our subscribers – updated.
Very short-term outlook: bullish
Short-term outlook: bullish
MT outlook: mixed
LT outlook: mixed
Trading position (short-term; our opinion): No positions justified from the risk/reward perspective.
As a reminder – “initial target price” means exactly that – an “initial” one, it’s not a price level at which we suggest closing positions. If this becomes the case (like it did in the previous trade) we will refer to these levels as levels of exit orders (exactly as we’ve done previously). Stop-loss levels, however, are naturally not “initial”, but something that, in our opinion, might be entered as an order.
Since it is impossible to synchronize target prices and stop-loss levels for all the ETFs and ETNs with the main market that we provide this level for (crude oil), the stop-loss level and target price for popular ETN and ETF (among other: USO, DWTI, UWTI) are provided as supplementary, and not as “final”. This means that if a stop-loss or a target level is reached for any of the “additional instruments” (DWTI for instance), but not for the “main instrument” (crude oil in this case), we will view positions in both crude oil and DWTI as still open and the stop-loss for DWTI would have to be moved lower. On the other hand, if crude oil moves to a stop-loss level but DWTI doesn’t, then we will view both positions (in crude oil and DWTI) as closed. In other words, since it’s not possible to be 100% certain that each related instrument moves to a given level when the underlying instrument does, we can’t provide levels that would be binding. The levels that we do provide are our best estimate of the levels that will correspond to the levels in the underlying assets, but it will be the underlying assets that one will need to focus on regarding the sings pointing to closing a given position or keeping it open. We might adjust the levels in the “additional instruments” without adjusting the levels in the “main instruments”, which will simply mean that we have improved our estimation of these levels, not that we changed our outlook on the markets.
Thank you.
Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief, Gold & Silver Fund Manager
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