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

Yesterday's upswing attempt looked promising at the beginning. But in the end, the bears overpowered the bulls, and Wednesday's gap didn't get closed. But the bulls opened strongly today, and the question is whether they'll succeed this time. And if not, what consequences will that have?

Let's take a closer look at the chart below (chart courtesy of www.stooq.com ).

Although the bulls took the futures yesterday above the upper border of the gap created on Wednesday, they weren't strong enough to close above it. A pullback followed as can be seen in yesterday candle's long upper shadow.

Despite this negative development, crude oil futures opened today with a bullish green gap, suggesting that the buyers could try once again to close the red gap. Should they succeed, the futures could move even higher and test the previously-broken supports. Right now, both the mid-July peaks and the upper border of the green rising trend channel serve as resistances.

But should the bulls fail once again and the futures close the green gap created earlier today, the way lo lower prices may be open. This is especially the case when we factor in the current position of the daily indicators - the Stochastic Oscillator generated its sell signal, while the CCI is very close to doing the same.

Connecting the dots, should we see the bulls' weakness, we'll consider opening short positions - small enough to account for this week's high volatility.

Summing up, the bulls were unable to close Wednesday's gap yesterday, and aren't seeing much success today either despite the bullish gap they started the day with. Should they fail and today's green gap gets closed in the process, lower prices may follow. They would be supported by Stochastic Oscillator's existing sell signal and the upcoming CCI's sell signal. Should we see reliable signs of the bulls' weakness, we'll consider opening short positions.

Trading position (short-term; our opinion): No position is 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