Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective.

Thursday’s invalidation of the earlier breakdown, Friday’s comeback to the south, supports and resistances. When will the price action convince us enough to justify opening next positions?

Let’s examine the charts below (charts courtesy of http://stockcharts.com).

Technical Picture of Crude Oil

On Friday, we wrote the following:

(…) Thanks to yesterday’s rebound black gold closed the day above the previously-broken medium-term red line, invalidating the earlier breakdown.

Although this is a bullish development, we should keep in mind that the commodity is still trading under the second resistance line – marked with blue, which means that as long as there is no breakout above it, higher prices of crude oil are doubtful.

From today’s point of view, we see the situation developed in tune with our assumptions and oil bears managed to keep crude oil not only below the blue resistance line, but also pushed the commodity under the red lime.

In this way, black gold invalidated the earlier tiny breakout, which doesn’t bode well for higher prices of light crude.

Nevertheless, in our opinion, as long as crude oil is trading above the green support zone, which is also reinforced by the 61.8% Fibonacci retracement and the 200-day moving average, a sizable move to the downside is not likely to be seen – especially when we factor in the proximity to the lower border of the green rising wedge seen on the monthly chart below.

In other words, a reversal from this area should not surprise us in the coming days – especially if the CCI and the Stochastic Oscillator manage to generate buy signals.

When can we expect next positions?

If black gold invalidates the breakdown under both the above-mentioned resistance lines marked on the daily chart and the daily indicators generate buy signals, we’ll consider going long.

On the other hand, however, if oil bears take the commodity lower and we see reliable breakdowns under the above-mentioned important supports, we’ll likely re-open short positions (very probably bigger positions than usual). Until this time, waiting at the sidelines for a confirmation or invalidation of the above is justified from the risk/reward perspective.

Trading position (short-term; our opinion): No positions 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.

Thank you.

Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief, Gold & Silver Fund Manager

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