Trading position (short-term; our opinion): Long positions (with a stop-loss order at $40.40 and the upside target around $50)

On Tuesday, crude oil gained 1.98% and invalidated the breakdown under the Fibonacci retracement. Is it enough to encourage oil bulls to further action?

Crude Oil’s Technical Picture

Let’s take a closer look at the charts and find out (charts courtesy of http://stockcharts.com).

Looking at the weekly chart, we see that crude oil extended gains, which resulted in a climb above the previously-broken 38.2% Fibonacci retracement. In this way, the commodity invalidated the earlier breakdown, which is a positive development. Nevertheless, it will turn into bullish if the black gold closes the week above this level.

How did this increase affect the very short-term chart? Let’s take a look at the daily chart and find out.

Yesterday, we wrote the following:

(…) crude oil extended gains and closed yesterday’s session above the green zone created by the September and November lows, which in combination with the buy signals generated by the indicators (the CCI also generated the buy signal) suggests further improvement in the coming days.

On the above chart, we see that oil bulls pushed the commodity higher as we had expected. As a result, light crude bounced off the green zone and closed the day above $44.

What’s next for Crude Oil?

Taking into account yesterday’s price action, the buy signals generated by the daily indicators and the medium-term picture, we believe that our upside targets from the previous alert will be in play in the coming day(s):

(…) In our opinion, the first upside target will be around $45, where the previously-broken lower border of the red declining trend channel is. If this resistance is broken, we may see an increase even to the upper border of the blue declining trend channel (currently above the barrier of $50).

Summing up, long positions are justified from the risk/reward perspective, because crude oil extended gains and invalidated the breakdown under the 38.2% Fibonacci retracement, which together with the buy signals generated by the indicators suggests (at least) a test of the previously-broken lower border of the red declining trend channel in the coming days.

Very short-term outlook: bullish
Short-term outlook: bullish
MT outlook: bullish
LT outlook: mixed

Trading position (short-term; our opinion): Long (already profitable) positions (with a stop-loss order at $40.40 and the upside target around $50) 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

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