Trading position (short-term; our opinion): No position is justified from the risk/reward perspective.
Last week brought us a continuation of the downswing, followed by stabilization and rebound. Oil price however appear weakening again earlier today. Have we seen a local top? Are lower prices again on the horizon? One could expect a more bullish reaction to the whispers of Saudi production cuts extension being almost guaranteed... Or to the news of the Mexico tariffs cancellation... Anyway, better examine the oil chart.
We'll take a closer look at the daily chart below (chart courtesy of www.stooq.com).
It shows that today, crude oil futures had opened with a gap for the second time in a row. They went on to rise above last week's peak but then reversed lower, invalidating the earlier tiny breakout. Currently, they trade well below $54.00.
Crude oil trades not only below the previously-broken late February and early-March lows, but also inside the declining orange trend channel. It suggests that as long as there is no breakout above these resistances, further improvement is questionable and another move to the downside can't be ruled out.
Summing up, the bearish momentum subsided in the latter half of the previous week. Crude oil bears have had trouble breaking below the lower border of the declining orange trend channel and a rebound higher followed. Looking at today's price action, it looks to be in jeopardy. Unless we see breakout above the Feb-Mar 2019 lows, another move to the downside remains on the table.
Trading position (short-term; our opinion): No position is justified from the risk/reward perspective.
Thank you.
Nadia Simmons
Forex & Oil Trading Strategist