Trading position (short-term; our opinion): Short position with a stop-loss order at $59.60 and the initial downside target at $53.28 is justified from the risk/reward perspective.

Yesterday, we wrote:

(...) the bulls opened the week with a green gap, which has triggered modest improvement in the following hours. The bulls are fighting to invalidate the earlier breakdown below the green trend channel, and have reached the lower border of the blue consolidation on intraday basis. Prices have pulled back since though, and are currently trading at around $56.00.

Such price action looks like verification of the earlier breakdown. Coupled with the sell signals of the daily indicators, it suggests that lower crude oil prices are just around the corner.

The situation developed in line with the above, and prices closed far away from the previously broken lower border of the blue consolidation.

Earlier today, the bulls attempted to move higher once again, yet failed. Another downswing is unfolding as the commodity is trading at around $55.65. Should we see it stick and move yet lower, where will the bears aim to reach? Let's quote our yesterday's words:

(...) the first target for the sellers will be today's green gap.

Additionally, should the sellers manage to close yesterday's green gap, the way to the green support line based on the October lows would be open.

Summing up, the retracement attempt of Friday's slide mostly fizzled out, and today is bringing us another oil downswing. The downside reversal at the strong combination of resistances: the 61.8% Fibonacci retracement, and the three gaps (pink, red and orange ones) is still in play. The sell signals of the daily indicators support lower prices, and the short position remains justified.

Trading position (short-term; our opinion): Short position with a stop-loss order at $59.60 and the initial downside target at $53.28 is justified from the risk/reward perspective.

Thank you.

Nadia Simmons
Forex & Oil Trading Strategist