Oil Trading Alert originally sent to subscribers on October 31, 2016, 11:27 AM.
Trading position (short-term; our opinion): Short positions (with a stop-loss order at $53.22 and initial price target at $46) are justified from the risk/reward perspective.
On Friday, crude oil lost 2.05% on news that OPEC officials didn’t reach an agreement in Vienna on how to reduce crude oil production. As a result, light crude slipped under $49. How low could the commodity go in the coming days?
Let’s examine the charts below and find out (charts courtesy of http://stockcharts.com).
On the weekly chart, we see that the red resistance line and a sell signal generated by the Stohastic Oscillator continue to support oil bears. Additionally, the CCI finally dropped under the level of 100, generating a sell signal and supporting further deterioration.
How low could the black gold go in the coming week? We believe that the best answer to this question will be the quotes from our Thursday’s alert:
(...) crude not only tested the barrier of $50, but also slipped below it and closed the day under this important support. In ths way, the commodity invalidated earlier breakout above this technically important level, which doesn’t bode well for oil bulls. Additionally, sell signals generated by the indicators continue to support further declines, which suggests that (...) if oil bears push the commodity under the recent lows, we’ll see a drop to around one of the following levels:
- $48.68 (38.2% Fibonacci retracement based on the Sep-Oct upward move)
- $47.32-$47.58 (a support area created by the 38.2% retarcement based on the Aug-Oct upward move, the 50% retracement based on the Sep-Oct upward move and the 50-day moving average)
- $46.50 (61.8% Fibonacci retracement based on the Sep-Oct upward move and the black rising support line based on the Aug and Sep lows)
Summing up, short (already profitable) positions continue to be justified from the risk/reward perspective as crude oil closed the day under $49, which means that invalidation of earlier breakout above the barrier of $50 and its negative impact on the price is still in effect. Additionally, sell signals generated by the indicators (daily and weekly) suggests further deterioration in the coming week.
Very short-term outlook: bearish
Short-term outlook: bearish
MT outlook: bearish
LT outlook: mixed with bearish bias
Trading position (short-term; our opinion): Short positions (with a stop-loss order at $53.22 and initial downside target at $46) are justified from the risk/reward perspective. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
As a reminder – “initial target price” means exactly that – an “initial” one, it’s not a price level at which we suggest closing positions. If this becomes the case (like it did in the previous trade) we will refer to these levels as levels of exit orders (exactly as we’ve done previously). Stop-loss levels, however, are naturally not “initial”, but something that, in our opinion, might be entered as an order.
Thank you.
Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief, Gold & Silver Fund Manager
Gold & Silver Trading Alerts
Forex Trading Alerts
Oil Investment Updates
Oil Trading Alerts
