Trading position (short-term; our opinion): short position with a stop-loss order at $59.77 and the exit target at $53.05 is justified from the risk/reward perspective.

Yesterday's oil session marked a bearish reversal. On the other hand, the bulls have opened today strongly. Yet, they've gone nowhere. So, is the glass half full, or half empty? In other words, what kind of a resolution of the current chart situation is the most probable one?

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

Although crude oil futures moved higher yesterday, the bulls failed to break above the late-July peak. It suggests that we could see a post double top decline in the very near future - especially when we factor in the fact that the red gap created at the beginning of August remains open.

Earlier today, crude oil futures opened the day with the green gap, which triggered further improvement and another test of the red gap. While this is a positive development for the bulls, as long as the above-mentioned resistances remain unbeaten, another bigger move to the upside is questionable. This is especially the case when we factor in the 76.8% and 78.6% Fibonacci retracements based on the mid-July-August downward move, which reinforce the area around the late-July peak.

Additionally, the CCI and the Stochastic Oscillator moved to their overbought areas, increasing the probability of reversal in the very near future.

Summing up, the bulls have given up their yesterday's gains, and despite the bullish gap opening earlier today, the late-July peak and the red gap stand still. The CCI and Stochastics are now in their overbought areas, increasing the probability of an approaching reversal. The short position remains justified.

Trading position (short-term; our opinion): short position with a stop-loss order at $59.77 and the exit target at $53.05 is justified from the risk/reward perspective.

Thank you.

Nadia Simmons
Forex & Oil Trading Strategist