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 gained 0.38% as a weaker U.S. dollar made the commodity more attractive for buyers holding other currencies. As a result, light crude came back above the resistance line, but can we trust this move?

Today’s alert is going to be quite brief, because crude oil didn’t do anything that would change the outlook on Tuesday and the same applies to today’s session so far. The only thing that crude oil did yesterday is that it moved initially higher and came back above the lower border of the black rising trend channel. Although this is a positive sign, the black gold is still trading under the key resistance zone and the sell signals generated by the daily indicators remain in place, suggesting lower prices in the following days.

Additionally, after yesterday’s market’s closure, the American Petroleum Institute showed that U.S. crude oil inventories dropped less-than-expected (840,000 barrels compared to analyst estimates of a 1.47 million barrels dip) and gasoline stocks increased by 1.4 million barrels. If today’s government data confirms these disappointing numbers, oil bears will receive another reason to act in the following hours. In this case, we’ll see a drop to (at least) around $52.16, where the 23.6% Fibonacci retracement based on the entire March-April upward move is.

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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