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 Tuesday, crude oil wavered between small gains and losses – similarly to what we saw a day earlier. However, this time, the black gold closed session under the 50-day moving average. Will this event encourage oil bears to act?
Today’s alert is going to be quite short, because crude oil didn’t do anything that would change the outlook on Tuesday. The only thing that crude oil did is that it moved initially higher but then reversed, cancelled all gains and finally closed the day below the 50-day moving average. Such daily reversal is a negative sign, but the outlook was bearish anyway, so nothing really changed.
However, after the market’s closure the American Petroleum Institute reported that U.S. crude inventories rose by 11.6 million barrels last week, which pushed crude oil futures lower. Earlier today, they approached Thursday’s low, which suggests that the commodity will likely follow them after the market’s open. Additionally, if the API report of an inventory rise is confirmed by the U.S. Energy Information Administration report, it would be the ninth straight week of increases, which will give oil bears reasons to act.
In this case, we’ll see a drop to the downside targets posted in our Friday’s alert:
(…) If (…) 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).
We will provide you with a bigger update once we see more interesting developments on the crude oil market - most likely tomorrow.
As always, we’ll keep you - our subscribers - informed should anything change.
Thank you.
Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief, Gold & Silver Fund Manager
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