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

Despite the rebound from 2020 lows, oil rolled over to the downside again. Are the bears as strong as they appear to be?

Let's take a closer look at the charts below (charts courtesy of http://stockcharts.com and www.stooq.com ).

Yesterday, we wrote the following:

(...) the futures extended gains earlier today and climbed to the 38.2% Fibonacci retracement that is based on the orange resistance gap. As it turned out, this resistance was strong enough to stop the bulls, which triggered a pullback and a comeback to levels around yesterday's close in the following hours.

What does it mean for the futures and the commodity itself?

In our opinion, further deterioration coupled with at least a retest of the psychological level of $30 may be just around the corner

(...) if today's report confirms a bigger-than-expected increase in black gold inventories (...)

The daily chart reveals that the situation developed in tune with the above scenario, and the futures extended losses almost to the $30 level.

This important support encouraged the bulls to act, which triggered a rebound in the following hours. But the orange gap continues to act as a major resistance, blocking the way higher just as the 38.2% Fibonacci retracement does.

Therefore, another retest of the $30 barrier or even of the recent low is a very likely scenario for the very near future.

Summing up, the situation remains too unclear to open any trading position at this time.

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

Thank you.

Nadia Simmons
Day Trading and Oil Trading Strategist

Przemyslaw Radomski, CFA
Editor-in-chief, Gold & Silver Fund Manager