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.
Although crude oil moved a bit higher on Tuesday, the barrier of $50 continues to keep gains in check. What’s next for the black gold?
Let’s take a closer look at the daily chart below (charts courtesy of http://stockcharts.com).
Today’s alert is going to be quite short, because crude oil didn’t do anything new. Yesterday, light crude bounced off the 200-day moving average and increased to an intraday high of $49.83, which suggests oil bulls’ weakness (they didn’t even manage to push the commodity to the barrier of $50).
Thanks to Tuesday’s increase crude oil verified the breakdown under the 61.8% Fibonacci retracement and closed the day below this resistance, which suggests that another downswing is very likely – especially when we factor in the sell signals generated by the indicators.
If this is the case and light crude drops below the 200-day moving average, the next downside target will be the blue support line based on the November and March lows (currently around $48.24). If it is broken, we’ll see a drop to around $47-$47.15, where the recent lows and the lower border of the long-term green rising trend channel are.
Finishing today’s alert, it is worth keep in mind that after yesterday’s market’s closure the American Petroleum Institute showed that U.S. crude oil inventories unexpectedly rose by 897,000 barrels in the week to April 21 to 532.5 million barrels. Additionally, gasoline stocks soared by 4.4 million barrels, easily missing an expected fall, and supplies of distillates dropped less than expected. If today’s government data confirms these disappointing numbers, oil bears will receive another reason to act in the following hours.
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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