Trading position (short-term; our opinion): Short positions (with a stop-loss order at $56.45 and an initial downside target at $45.81) are justified from the risk/reward perspective.

On Friday, crude oil rebounded slightly, but did this increase change anything in the technical picture of the back gold?

Let’s examine the chart below to find out what can we infer from them (charts courtesy of http://stockcharts.com).

Looking at the daily chart, we see that crude oil moved higher on Friday and closed the day above the previously-broken 50-day moving average, invalidating the earlier breakdown. But is this event as bullish as it looks at the first sight? In our opinion, it’s not. Why? Because the size of volume that accompanied Friday’s increase was smaller than day earlier, which doesn’t confirm oil bulls’ strength. Additionally, the sell signal generated by the indicators are still in play, supporting oil bears and another attempt to move lower.

If this is the case, and the black gold extends losses the next downside target will be the lower border of the blue consolidation and the lower line of the black rising trend channel (around $51.62-$51.80).

Summing up, short positions continue to be justified as crude oil remains below the key resistance zone and the sell signal generated by the indicators support another attempt to move lower, suggesting a test of the lower border of the blue consolidation and the lower line of the black rising trend channel (around $51.62-$51.80).

Very short-term outlook: bearish
Short-term outlook: mixed with bearish bias
MT outlook: mixed
LT outlook: mixed

Trading position (short-term; our opinion): Short positions (with a stop-loss order at $56.45 and an initial downside target at $45.81) 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.

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.

Thank you.

Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief, Gold & Silver Fund Manager

Gold & Silver Trading Alerts
Forex Trading Alerts
Oil Investment Updates
Oil Trading Alerts