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

The last session of the previous week took black gold above the major short-term resistance, which stopped the sellers several times in the past. Will this bullish event be enough to push the price of the commodity higher in the coming week?

Let’s analyze the charts below to find out what the coming week can bring (charts courtesy of http://stockcharts.com).

The first thing that catches the eye on the weekly chart is weekly closure above the 200- week moving average, which invalidated the earlier breakdown under this important resistance Additionally, the RSI and the Stochastic Oscillator generated buy signals, suggesting higher prices of black gold in the coming week.

Despite these bullish developments, the very short-term picture of the commodity raises some concerns about the future of buyers. Let’s take a closer at the charts below.

Looking at the above chart, we see that although crude oil declined after Friday’s market’s open, the support area created by the 76.4% and the 78.6% Fibonacci retracements (marked with the green horizontal dashed lines) stopped the sellers, triggering a rebound (yes, this is one more positive signal).

Thanks to this move, the price of black gold hit an intraday high of $54.22 and climbed to the major very short-term resistances seen on the chart below. Unfortunately (for the bulls) this is the place where doubts begin to appear. Why?

Because despite Friday’s upswing, oil bulls didn’t manage to hold gained levels for the second time in a row (as a reminder, we saw a very similar price action during Tuesday’s session), which resulted in a correction of the earlier move and another invalidation of the small breakout above the blue resistance line based on the previous highs and the 50% Fibonacci retracement.

A similar price action at the beginning of the previous week caused a sharp decline and a re-test of the major short-term supports on the following session. Therefore, taking all the above into account, we think that one more downswing (to the above-mentioned support area created by the Fibonacci retracements or even to the barrier of $50) from current levels should not surprise us in the very near future.

Summing up, the overall situation in the short term remains almost unchanged as the price of black gold is still trading in a narrow range between the very short-term resistances and the lower border of the last week’s gap. Therefore, as long as there is no breakout/breakdown a bigger move to the upside/downside is not likely to be seen.

Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective. 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
Przemyslaw Radomski, CFA
Founder, Editor-in-chief, Gold & Silver Fund Manager

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