Trading position (short-term; our opinion): No positionis justified from the risk/reward perspective.

Oil bulls are a battle-hardened species. Not only have they rebuffed the bears' attack to close higher yesterday, they've been building upon their gains earlier today too. Right now, they're in the vicinity of an important resistance level. Will they manage to break above it? We're not too far from opening a new trading position...

Let's take a closer look at the charts below (charts courtesy of http://stockcharts.com and www.stooq.com ).

Yesterday's session opened with the bears taking oil lower only to see the bulls take initiative and close the day above the previously-broken lower border of the blue consolidation.

The buy signals continue to support the buyers but there's a fly in the ointment - the decreasing volume of the upswing. Let's take a look at the action in the futures for more clues.

Earlier today, the oil futures opened with a bearish gap, but the bulls haven't given up - they have managed to close that gap before long. At the moment of writing these words, black gold is trading at around $56.50.

Let's quote our yesterday's observations as they're still valid today:

(...) crude oil futures have invalidated their earlier breakdown below the lower border of the blue consolidation... Coupled with the buy signals of the daily indicators, this suggests further price improvement. Such a bullish outcome would be more likely and reliable though only if the futures break above the 38.2% Fibonacci retracement first.

Should we see that, the next upside target would be the red gap.

But this gap has stopped the bulls earlier this month - as long as it remains open, another move to the downside can't be ruled out. Should the bulls prevail however, we'll likely see a test of the upper border of the declining red trend channel. In such a case, we'll consider opening long positions.

Summing up, black gold has invalidated its breakdown below the recent consolidation, and the daily indicators suggest further improvement. The only cautionary sign is the comparatively lower volume of yesterday's session. Should we see oil trading above the red gap, we'll consider opening long positions.

Trading position (short-term; our opinion): No positionis justified from the risk/reward perspective. 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