Trading position (short-term; our opinion): Short positions with a stop-loss order at $54.12 and initial (!) target price at $35.72 are justified from the risk/reward perspective.
On Friday, crude oil moved higher as a weaker greenback supported the price. In this environment, light crude came back above $46, but did this increase change anything in the overall picture of the commodity?
On Friday, the USD Index extended losses and dropped to an intraday low of 96.65, making crude oil more attractive for buyers holding other currencies. As a result, light crude came back above $46, but did this increase change anything in the overall picture of the commodity? Let’s check (charts courtesy of http://stockcharts.com).
Looking at the above charts, we see that although crude oil moved littl higher in the previous week, the overall situation in the long- and medium term hasn’t changed much, therefore, what we wrote On Thursday is still up-to-date:
(…) the commodity reversed and invalidated the breakdown under the blue suppot line, which triggered a shap rebound. This is a positive signal, which suggests that we may see further improvemet and an increase even to the red declining resistance line (currently around $48.60) in the coming days.
Did yesterday’s rally change anything in the long-term picture of the commodity? (…) although crude oil rebounded, the commodity remains under the green dashed line, which means that the head and shoulders pattern is underway (even if light crude increases from here and tests this line – currently around $48.70). Therefore, we believe that if crude oil declines in the coming weeks and breaks under the green support line (the neck line of the formation), we’ll see not only fresh 2015, but also further deterioration, which could took the commodity even to $25.
Summing up, although crude oil moved little higher on Friday, the commodity still remains under important long- and medium-term resistance lines, which means that further deterioration is more likely than not and short positions continue to be justified from the risk/reward point of view.
Very short-term outlook: bearish
Short-term outlook: bearish
MT outlook: bearish
LT outlook: mixed with bearish bias
Trading position (short-term; our opinion): Short positions with a stop-loss order at $54.12 and initial (!) target price at $35.72 are justified from the risk/reward perspective. We will keep you – our subscribers – informed should anything change.
Thank you.
Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief
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