Trading position (short-term; our opinion; levels for crude oil's continuous futures contract): Small (50% of the regular positions size) short positions are justified from the risk-reward perspective with stop loss $38.63 at and $30.22 as the initial target price.
Crude oil managed to close above the strong resistance provided by the 50% Fibonacci retracement level and it even moved higher in today's pre-market trading. It didn't move above our stop-loss level though, At the moment of writing these words it's after an intraday reversal. In our view, the odds are that the previous breakout above the mid-March high and the 50% Fibonacci retracement will be invalidated shortly.
The above chart shows how we came up with the current stop-loss level. The reason for it being where it is, is that it's slightly above the 61.8% Fibonacci retracement that's based on the size of the key price gap.
It's not commonly known, but the retracements based on gaps also tend to serve as resistance levels. In fact, it seems that that's what happened today.
Summing up, we continue to think that small short positions in crude oil are justified right now.
Trading position (short-term; our opinion; levels for crude oil's continuous futures contract): Small (50% of the regular positions size) short positions are justified from the risk-reward perspective with stop loss at $38.63 and $30.22 as the initial target price. The July contract is trading at about $34.98 at the moment of writing these words.
In case of the futures contracts that are more distant than the current contract, we think that adding the premium (difference between the July and other contracts) to both: stop-loss and initial target prices is justified.
Thank you.
Nadia Simmons
Day Trading and Oil Trading Strategist
Przemyslaw Radomski, CFA
Editor-in-chief, Gold & Silver Fund Manager