Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective.
On Wednesday, crude oil gained 2% as situation in Iran raised concerns about supply risks. In this environment light crude closed the day above $61, but will the rally continue?
Let’s take a look at the technical picture of black gold (charts courtesy of http://stockcharts.com).
Yesterday, crude oil moved sharply higher and hit a fresh 2018 high. Thanks to the recent increases black gold broke above the upper border of the black rising trend channel and reached the black dashed line (parallel to the upper line of the trend channel) based on the late November peak.
Although we saw a tiny breakout above this line, oil bulls didn’t manage to hold gained levels, which resulted in an invalidation of the breakout. Additionally, when we take a closer look at the current position of the indicators we can clearly see bearish divergences between them and the price of light crude, which increases the probability of reversal soon. The pro bearish scenario is also reinforced by the long-term picture of the commodity, which we commented in our previous Oil Trading Alert:
(…) although black gold extended gains (…) the above-mentioned key resistance zone created by the 2015 peaks remains in cards. In other words, as long as there is no breakout above this important resistance area, the way to higher prices is blocked and reversal is just around the corner. Therefore, if we see a reliable bearish development (for example, an invalidation of the tiny breakout above the upper border of the blue rising trend channel), we’ll re-open short positions in the coming days.
As always, we’ll keep you - our subscribers - informed should anything change.
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
