Trading position (short-term; our opinion; levels for crude oil's continuous futures contract): Speculative long positions in crude oil with $28.73 as the binding profit-take level, and $18.96 as the stop-loss level.

In yesterday's analysis we described multiple reasons due to which crude oil was likely to move lower, but black gold managed to rally anyway. Fortunately, our tight stop-loss order took us off the market about $1.50 below where crude oil is trading at the moment of writing these words. It's hard to call a trade that was closed at a stop-loss a success, but please note that the quality of one's trades is reflected not only in the profits, but also in how well the risk is being managed. The risk was relatively small and the profits on our previous positions in crude oil were many times bigger than this trade's result.

Ok, so what's next for the black gold?

Given the strength with which it broke above the declining resistance line and the fact that crude oil opened with a bullish gap today, it seems that the next very short-term move will be to the upside. The next particularly strong resistance level is based on the 38.2% Fibonacci retracement level and the April highs - at about $30.

Based on the triangle-vertex-based reversal, we're likely to see some kind of reversal on Thursday or Friday, and given the current momentum, it seems likely that it will be a top.

Consequently, it seems that opening a quick long position right now would be justified from the risk to reward point of view. This time, we'll place the stop-loss level below the previously broken declining resistance line, which now serves as support.

Summing up, despite numerous bearish factors, crude oil showed exceptional strength and soared clearly above the declining resistance line, which made the short-term outlook bullish. This is especially the case since black gold opened today with a bullish gap, and is trading at $23.12 at the moment of writing these words.

Trading position (short-term; our opinion; levels for crude oil's continuous futures contract): Speculative long positions in crude oil with $28.73 as the binding profit-take level, and $18.96 as the stop-loss level.

Thank you.

Nadia Simmons
Day Trading and Oil Trading Strategist

Przemyslaw Radomski, CFA
Editor-in-chief, Gold & Silver Fund Manager