Trading position (short-term; our opinion): Short position with a stop-loss order at $62.82 and the initial downside target at $59.38 is justified from the risk/reward perspective.
Crude oil futures extended gains yesterday, breaking above the upper border of the purple consolidation, and an attempt on also the key resistance zone followed.
The bulls took the futures above the upper border of the rising green trend channel and the 78.6% Fibonacci retracement. While this is bullish on the surface, the buyers just couldn't gained ground, and today's trading started with the red gap.
That red gap results in invalidation of all yesterday's breakouts, and that is as bearish as it gets. The daily indicators are still very extended, supporting the likelihood of upcoming resolution to the downside.
Taking all the above into account, further deterioration is probably just around the corner and opening short positions is justified from the risk/reward perspective.
Should the futures extend losses from here, the initial downside target for the sellers will be the Friday's green gap.
Summing up, while the bulls appeared to have made a breakthrough on a closing basis yesterday, today's bearish opening appears to have dashed their hopes. The lower border of the red resistance zone continues to keep further gains in check. This zone is marked by the upper border of the rising green trend channel, and the 76.4% and 78.6% Fibonacci retracements. The extended daily indicators support a downside reversal too. As we have seen reliable signs of the bulls' weakness, opening short positions is justified by the risk-reward perspective.
Trading position (short-term; our opinion): Short position with a stop-loss order at $62.82 and the initial downside target at $59.38 is justified from the risk/reward perspective.
Thank you.
Nadia Simmons
Forex & Oil Trading Strategist