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

Oil price went on to decline yesterday, building on Friday’s move lower. However, a not insignificant part of yesterday’s downswing had been erased before the day was over and today, we’re seeing the oil bulls in action again. The current division over extending Iranian oil waivers seems to have a hand in driving prices higher. How will the bulls fare against the powerful combination of technical factors facing them?

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

Crude oil moved a bit lower during Monday’s session and is rebounding in today’s trading so far (currently changes hands at around $59.55). However, the commodity is still trading both inside the red rising wedge and above the support area created by the previously-broken February and March 2019 and mid-November 2018 peaks (marked with two dashed horizontal purple lines on the above chart).

Examination of other technical chart features on the daily chart shows that the current price is still below the medium-term green line and the red resistance line based on January and February peaks. These powerful resistances still remain unbroken by the bulls, as you can see below:

We believe that what we wrote yesterday remains up-to-date also today:

(…) a bigger move to the downside will be more likely and reliable only once we see the price moving below these lines and breaking the lower border of the red rising wedge.

Trading position (short-term; our opinion): No position is justified from the risk/reward perspective. However, if crude oil drops below the above-mentioned support levels, we’ll consider opening short positions. 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