Trading position (short-term; our opinion): Short position with a stop-loss order at $59.60 and the initial downside target at $53.28 is justified from the risk/reward perspective.

Despite the buyers struggling initially with overcoming the lower border of the blue consolidation during yesterday's session, oil futures finished the day back inside the rising green trend channel. This means invalidation of the earlier breakdown below the lower border of the formation.

This is certainly a bullish development, and the buyers continued with today's green gap that has translated into further gains in the following hours.

As a result, the futures came back above the previously broken lower border of the blue consolidation, suggesting a test of the red resistance zone created by the late-Nov lows and the 61.8% Fibonacci retracement in the very near future.

As long as the price action is confined inside the large declining Friday's candle, another attempt to move lower is very likely. This is especially so when we factor in the proximity of the major resistance zone created by three gaps and the 61.8% Fibonacci retracement. Combined, they have been strong enough to stop the bulls several times in the previous month already.

Summing up, the bulls have closed yesterday's session back inside the rising trend channel in the end, and upswing continuation rules today. There is however a strong combination of resistances ahead: the 61.8% Fibonacci retracement, and the three gaps (pink, red and orange ones). They have stopped the bulls a few times already, and the short position thus remains justified.

Trading position (short-term; our opinion): Short position with a stop-loss order at $59.60 and the initial downside target at $53.28 is justified from the risk/reward perspective.

Thank you.

Nadia Simmons
Forex & Oil Trading Strategist