Trading position (short-term; our opinion): Short position with a stop-loss order at $66.75 and the initial downside target at $59.49 is justified from the risk/reward perspective.

Although crude oil futures moved higher after Wednesday's open and broke above the previous peaks, this improvement was very temporary, and the bears took over in the following hours.

As a result, the futures came back below the lower border of yesterday's red gap, creating a very long upper shadow. This is clearly a bearish sign, suggesting further deterioration.

Perhaps the spike has changed the long-term picture? No, it remains unchanged.

Recent increases took crude oil slightly above the orange gap and the 61.8% Fibonacci retracement. However, the bulls failed to push the commodity any higher, and a pullback taking it back below the above-mentioned levels followed.

This way, black gold invalidated the earlier tiny breakouts. Coupled with the proximity to the red gap, it increases the likelihood of further deterioration in the coming month.

Let's take the above into account, and recall our yesterday's observations. They're up-to-date also today:

(...) the current position of the indicators also favors the bears, suggesting that further declines are just around the corner.

Should it be the case and the futures extend losses from here, we'll likely see a decline to at least the nearest bullish green gap created in mid-December. This is where also the 38.2% Fibonacci retracement is, which together with the gap serves as the closest short-term support.

Trading position (short-term; our opinion): Short position with a stop-loss order at $66.75 and the initial downside target at $59.49 is justified from the risk/reward perspective.

Thank you.

Nadia Simmons
Forex & Oil Trading Strategist