Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective.
On Monday, the black gold gained 2.11% after Saudi Arabia and Russia said that supply cuts need to last into 2018. In these circumstances, light crude climbed above the previously-broken long-term resistance line and closed the day above $48. Will we see a test of the barrier of $50 in the coming days?
Let’s take a closer look at the charts and find out (charts courtesy of http://stockcharts.com).
The first thing that catches the eye on the above charts is an invalidation of the breakdown under the long-term green resistance line, which is a bullish development and suggests further improvement. But will we see such price action?
As you see on the daily chart, thanks to yesterday’s increase, the commodity climbed to the red resistance area (created by the 50% Fibonacci retracement based on the entire February-May downward move, the 50- and 200-day moving averages), which triggered a pullback. As a result, light crude invalidated the tiny breakout above the Fibonacci retracement, which suggests that another attempt to move lower may be just around the corner.
Additionally, this scenario is also reinforced by the long-term picture of the commodity.
On the monthly chart, we see that the recent upswing approached crude oil to the previously-broken lower border of the blue rising wedge, which looks like a verification of the breakdown. Additionally, the sell signals generated by the long-term indicators remain in play, suggesting that lower prices of the black gold are still ahead us.
Therefore, if we see more bearish signals (for example, a comeback below the long-term green line), we’ll consider re-opening short positions. 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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