Trading position (short-term; our opinion): Short positions in crude oil (100% size of the regular trading position) are justified from the risk to reward point of view with $11.22 as the binding profit-take level, and with $33.78 as the stop-loss level. We might adjust this target in the following Alerts.
Crude oil moved higher yesterday, and we took profits from our previous long position. The size of the upswing was not as big as we had originally expected it to be, but still, we managed to close the position "in the green".
Why did we close it? Because crude oil was "supposed to" rally along with the general stock market and the declining USD Index - and it didn't. Well, it did move higher, but the size of the move was very small, which emphasized the weakness of the crude oil bulls.
As the stock market appears to be topping either now, or shortly, crude oil seems to be ready to fall further. At this moment, it's unclear where the next bottom will form, but in case the drop is very volatile, we can't rule out a situation in which crude oil slides all the way to its 1998 bottom. If that takes place, we'll be more than happy to take enormous profits off the table.
The 2001 bottom serves as an additional target level. If crude oil shows strength close to it, we might take profits off the table close to this price level - that's at about $17.
Summing up, the corrective upswing in crude oil appears to be nearing its end, or it's already over, and the next wave down is likely to start soon. While the bottoming target is still relatively unclear at this time, it's quite clear that the next move in black gold will be to the downside - in line with the move lower in the general stock market.
Trading position (short-term; our opinion): Trading position (short-term; our opinion): Short positions in crude oil (100% size of the regular trading position) are justified from the risk to reward point of view with $11.22 as the binding profit-take level, and with $33.78 as the stop-loss level. We might adjust this target in the following Alerts. We are entering this short position with crude oil at $23.43.
Thank you.
Nadia Simmons
Day Trading and Oil Trading Strategist
Przemyslaw Radomski, CFA
Editor-in-chief, Gold & Silver Fund Manager
