Trading position (short-term): In our opinion no positions are justified from the risk/reward perspective.
On Monday, U.S. markets were shut for the President’s Day holiday. Therefore, what we wrote in our last Oil Trading Alert about the situation in crude oil is still up-to-date and today we’ll focus only on the technical changes in WTI Crude Oil (charts courtesy of http://stockcharts.com.)
On the above chart, we see that the situation hasn’t changed much as trade volume was thin. Although the CFD invalidated a breakdown below the upper border of the rising trend channel/rising wedge (which is a bullish signal), it still remains in a narrow range between this important support line and the February high. From this perspective, it seems that as long as there is no breakout above the monthly high (or a breakdown below the major support line), a bigger upswing (or downswing) is not likely to be seen.
As we wrote in our last Oil Trading Alert:
(…) the first upside target for the buyers is the 50% Fibonacci retracement level based on the entire Aug-Jan. decline (around $101.70). However, looking at the position of the indicators (sell signals generated by the Stochastic Oscillator and CCI remain in place supporting oil bears), it seems that we may see another attempt to invalidate the breakout above the upper border of the rising trend channel (rising wedge) in the nearest future.
Summing up, the current situation in WTI Crude Oil is unclear as the CFD remains in a narrow range between an important support line and the February high. On one hand, if an invalidation of the breakdown encourages oil bulls to act, we may see another attempt to move higher, which will likely have a positive impact on crude oil in the following hours. On the other hand, if sell signals generated by the indicators and the resistance level encourage oil bears to push the sell button, we may see another drop below the upper border of the rising trend channel/rising wedge, which will likely trigger a decline in crude oil. In this case, if the upper line of the rising trend channel (in the case of light crude) is broken and the price drops below the 200-day moving average, we will likely see a downward move to (at least) the lower border of the rising trend channel (currently around $97.86) in the coming day (or days).
Very short-term outlook: mixed
Short-term outlook: bullish
MT outlook: bullish
LT outlook: mixed
Trading position (short-term): In our opinion, as long as there is no an invalidation of the breakout above the upper line of the rising trend channel, the situation will not be bearish enough to justify opening short positions. However, if crude oil declines below the 200-day moving average, we might consider opening short positions. 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
Forex Trading Alerts
Oil Investment Updates
Oil Trading Alerts
