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 moved higher and reached a very important resistance zone. Will it manage to stop oil bulls and trigger a reversal in the coming days?

Let’s examine the daily chart below to find out (charts courtesy of http://stockcharts.com).

Yesterday, crude oil moved higher and reached a very important resistance area created by the 50% Fibonacci retracement based on the entire January – March downward move, the 61.8% retracement based on the March declines and the orange declining resistance line based on the February and March highs. Additionally, in this zone, the size of the recent rally is very similar to the entire January – February upward move, which increases the probability of reversal (even if the black gold tests the previously-broken 50-day moving average first). On top of that, the CCI and the Stochastic Oscillator climbed to their overbought areas, increasing the likelihood of reversal in a very near future.

Summing up, short positions continue to be justified as crude oil reached the very important resistance zone, which could stop oil bulls and trigger another downswing in the coming day(s).

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 $56.45 and an initial downside target at $45.81) are justified from the risk/reward perspective. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.

Thank you.

Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief, Gold & Silver Fund Manager

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