Trading position (short-term; our opinion): Short position with a stop-loss order at $58.37 and the initial (!) downside target at $50.38 in crude oil is justified from the risk/reward perspective.
Another day, another attempt to move lower. Looks like a rather successful one. Where are the buyers? Let’s take a closer look to examine the most up-to-date developments.
Please see the daily perspective below (charts courtesy of http://stockcharts.com).
Another day, another decline. Although crude oil moved a bit higher earlier today, the bulls didn’t manage to push the price all the way up to the upper border of the purple rising trend channel or the 38.2% Fibonacci retracement. Their weakness is hard to conceal.
As a result, the black gold tumbled well below $54 and at this very moment trades at around $53.35 – right at the lower line of the red resistance zone. At the same time, the CCI and the Stochastics generated their respective sell signals, suggesting further deterioration in the following day(s).
Taking all the above into account, we believe that if oil extends losses from here and breaks below this week’s lows, we’ll see at least a test of the lower border of the purple rising trend channel (currently at around $52.04). If this support is broken, the next downside target will be the 50-day moving average (at $50.73) or even the green support area around the barrier of $50.
Summing up, the (already profitable) short position continues to be justified from the risk/reward perspective as crude oil invalidated the earlier breakout above the upper border of the red resistance zone. The bulls didn’t manage to test the upper border of the purple rising trend channel. Additionally, CCI and Stochastics both generated sell signals, raising the likelihood of further declines in the near future.
Trading position (short-term; our opinion): Short position with a stop-loss order at $58.37 and the initial (!) downside target at $50.38 in crude oil is justified from the risk/reward perspective. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
Thank you.
