Trading position (short-term; our opinion; levels for crude oil's continuous futures contract): No positions are justified from the risk-reward perspective. However, we think that automatically (without an additional confirmation from us) opening a full (100% of the regular position size) short position will be justified if crude oil is trading below $34 five minutes before the markets close in the U.S.. The initial profit-take level for this short position would be $25.13, and the stop-loss would be $42.12.
Crude oil has been moving lower in a rather steady manner, and then an upswing came. But given that the there was no daily close below the mid-March high (in terms of the daily closing prices) and the 50% Fibonacci retracement level, our Friday's comments remain up-to-date:
This means that the outlook for crude oil is more bearish than not, but it's still not bearish enough to justify opening a short position at this time. Black gold moved lower in a quite visible way, but it might have been just a correction within an uptrend, similar to what we saw in the middle of May.
However, once crude oil invalidates the breakout above the 50% retracement and the mid-March high, the outlook will become much more bearish, especially if it happens in terms of the closing prices.
Summing up, the short-term outlook for crude oil is currently too unclear to justify any trading positions, but the bearish case seems more likely than the bullish one at this time.
As always, we'll keep you - our subscribers - informed.
Trading position (short-term; our opinion; levels for crude oil's continuous futures contract): No positions are justified from the risk-reward perspective. However, we think that automatically (without an additional confirmation from us) opening a full (100% of the regular position size) short position will be justified if crude oil is trading below $34 five minutes before the markets close in the U.S.. The initial profit-take level for this short position would be $25.13, and the stop-loss would be $42.12.
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 SimmonsDay Trading and Oil Trading Strategist
Przemyslaw Radomski, CFAEditor-in-chief, Gold & Silver Fund Manager
