Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective.
Yesterday there was no trade in US, which is why today's alert will analyze Wednesday's crude oil futures’ performance. What interesting can yesterday's price action tell us about the next move of black gold?
Looking at the above chart, we see that the green gap encouraged oil bulls to act but their yesterday's determination raises quite big concerns about their potential strength (at least for the moment of writing this alert).
Why? As you see on the above chart, although they broke not only above the blue resistance line based on the previous highs but also above the red resistance line (based on four earlier peaks created on the October 10, October 17, October 29 and October 31), they didn’t manage to hold gained levels for the second time in a row.
As a result, the price declined once again, invalidating the earlier breakouts (not only above these lines but also above the 50% Fibonacci retracement), which doesn’t confirm that the bulls have strengthened enough to be able to generate a bigger move to the north. Additionally, the Stochastic Oscillator generated a sell signal earlier today, increasing a probability of another downswing in the very near future.
Nevertheless, please keep in mind that as long as the green gap remains open, the fate of the bulls is not yet settled and there is a chance to bring another bounce from current levels and a re-test of the nearest resistance lines.
However, looking at the shape of the entire October-November downward move, we think it's more likely that black gold will re-test the recent supports (the barrier of $50 and the support area created by the 76.4% and the 78.6% Fibonacci retracements marked with the green horizontal dashed lines on the daily chart in our Monday’s Oil Trading Alert) or even hit a fresh low around $47.30 (in this area you will find the long-term green support line based on the August 2016 and the June 2017 lows, which is seen more clearly on the daily chart in the above-mentioned alert) before we see a return to higher levels.
Summing up, the very short-term outlook remains bearish, suggesting another attempt to move lower in the following days. 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
Przemyslaw Radomski, CFA
Founder, Editor-in-chief, Gold & Silver Fund Manager
Gold & Silver Trading Alerts
Forex Trading Alerts
Oil Investment Updates
Oil Trading Alerts
