Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective.
On Tuesday, crude oil lost 2.42% as worries over the sharp increase in U.S. production continued to weigh on investors’ sentiment. In this environment, light crude dropped under the short-term support line, but will we see further deterioration in the following days?
Let’s take a closer look at the charts below and find out (charts courtesy of http://stockcharts.com).
Yesterday, crude oil dropped not only under $48, but also below the blue support line based on the previous lows. Thanks to this decline, the commodity extended losses and reached the major support area, which means that our previous commentary remains up-to-date also today:
(…) the space for declines seems limited (at least in the very short-term perspective) as the long-term green support line based on the August and November lows is quite close from current levels. In this area are also the 61.8% Fibonacci retracement based on the November-January upward move and the 50% retracement based on the August-January increases, which together stopped oil bears in March.
Therefore, in our opinion, as long as there is no breakdown under this solid support area further declines are doubtful and rebound is more likely. However, if we see a drop and a daily closure below this area we’ll consider re-opening short positions. As always, we will keep you – our subscribers – informed should anything change.
On an administrative note, due to your editors travel plans, there will be no Oil Trading Alert on Thursday and Friday. The next Oil Trading Alert is scheduled for Monday, May 8 2017.
Thank you.
Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief, Gold & Silver Fund Manager
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