Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective.

On Monday, the black gold extended gains after Russia and Saudi Arabia supported the idea of extending the supply-cut agreement into 2018. In these circumstances, light crude closed another day above $46 and the lower border of the trend channel. What does it mean for the commodity?

Let’s take a closer look at the charts below and find out (charts courtesy of http://stockcharts.com).

Looking at the charts, we see that crude oil moved higher once again and remains inside the red declining trend channel, which means that what we wrote yesterday is up-to-date also today:

(…) the weekly chart (…) light crude slipped slightly below the 38.2% Fibonacci retracement based on the entire February-January upward move, but then reversed and rebound.

How did this price action affect the very short-term picture of the commodity?

(…) light crude slipped to the support zone created by the 70.7% retracement based on the August-January upward move and the 88.6% retracement based on the November-January increases (and reinforced y the 38.2% retracement seen on the weekly chart), which encouraged oil bulls to act.

As a result, crude oil rebounded sharply and came back above the 61.8% Fibonacci retracement and the lower border of the red declining trend channel, invalidating the earlier breakdowns. Additionally, Friday’s move materialized on significant volume, which increases the probability of further improvement in the coming week. This scenario is also reinforced by the buy signals generated by the Stochastic Oscillator and the RSI. At this point, it is worth noting that we saw the RSI at similar levels in mid-March, which translated into a bigger upward move in the following weeks. Therefore, it seems to us that further improvement is just around the corner.

If this is the case, the initial upside target will be around $47.86, where the previously-broken long-term green line (based on the August and November lows) currently is.

Summing up, (...) the combination of the Fibonacci retracements stopped further deterioration and triggered a rebound, which invalidated the earlier breakdown under the 61.8% Fibonacci retracement and the lower border of the red declining trend channel. This is a bullish development, which suggests further improvement in the coming week.

Very short-term outlook: mixed with bullish bias
Short-term outlook: mixed
MT outlook: mixed
LT outlook: mixed

Trading position (short-term; our opinion): No positions 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, Gold & Silver Fund Manager

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