Trading position (short-term; our opinion): Short positions (with a stop-loss order at $54.15 and the next downside target at $43.08) are justified from the risk/reward perspective.

On Thursday, crude oil extended losses as disappointing EIA weekly report continued to weigh on investors’ sentiment. Thanks to these circumstances, light crude lost 0.60% and closed another day under the lower border of the red declining trend channel. What’s next for the commodity?

Crude Oil’s Technical Picture

Let’s take a closer look at the charts and find out (charts courtesy of http://stockcharts.com).

Looking at the above charts, we see that crude oil extended losses and hit a fresh June low of $44.22, which suggests that what we wrote yesterday remains up-to-date:

(…) Thanks to yesterday’s drop, the black gold not only test our downside targets, but also declined and closed the day below them, which is a bearish development. Additionally, the sell signals generated by the weekly and daily indicators remain in place, suggesting that another downswing is still ahead us. If this is the case, and light crude extends losses from current levels, we’ll see a test of the 38.2% Fibonacci retracement (marked on the weekly chart) in the following days.

Nevertheless, if this support doesn’t stop oil bears, we may see a decline even to around $43-$43.07, where the green support zone (created by the September and November 9 lows and the red dashed support line) is.

Summing up, short (profitable) positions continue to be justified from the risk/reward perspective as crude oil is still trading under the lower border of the red declining trend channel, which suggests that another move to the downside should not surprise us.

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 $54.15 and the next downside target at $43.08) are justified from the risk/reward perspective. We will keep you – our subscribers – informed should anything change.

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

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