Oil has indeed rebounded from the key support, and our decision to open long positions became immediately profitable. It's up to the bulls to prove their mettle right now - how far can they take the oil price? Let's consult the charts and assess the unfolding move's veracity.
Meanwhile, the USD Index has risen from its daily lows near important supports yesterday. Both of them have been approached yet not tested. Can there be more downside action shortly before another leg higher?
As you've read in the previous Oil Trading Alerts and Forex Trading Alerts, Nadia Simmons, who is the author of these reports has not been feeling well. This remains to be the case, and as it's been several days since you received crude oil or forex analysis from us, I (PR here) would like to help.
Consequently, I will be writing analyses of both: crude oil and the forex market and I will publish them combined, so that those, who normally enjoy access to only one of these reports, will get something extra. That's not much of a positive surprise for those, who already have access to both Alerts (for instance through the All-Inclusive Package), so if you have access through this package or you subscribed to both products individually, I will provide you with something extra. I will analyze any company of your choice with regard to its individual technical situation, and I will send you this on-demand analysis over e-mail. If this applies to you, please contact us with the name of the company that you're interested in.
Having said that, let's take a look at the crude oil market.
Crude Oil Analysis
On Wednesday, crude oil hit our binding exit target, which means that our short position in crude oil was closed and consequently, you took profits off the table (that is if you chose to follow us on that trade). And yesterday we switched sides and provided you with detail for the next long trade. Crude oil declined a bit below our entry price, thus triggering the long position at $51.72, and the position became profitable almost immediately. At the moment of writing these words, crude oil is rallying after yesterday's turnaround, and profits are rising.
Let's take a closer look.
Yesterday's intraday low was $51.01, but crude oil stayed below our entry price of $51.72 for less than 2 hours. This was more than enough time to enter the position manually, but it would have been more convenient to simply enter a waiting buy limit order that would be executed at the above-mentioned price.
The shape of yesterday's session is in tune with the bullish case that we outlined yesterday. It took the form a daily reversal and black gold is rising today, confirming its validity.
Our yesterday's comments on the above medium-term crude oil chart remain up-to-date:
The rising medium-term support line was just reached and the strong support provided by the previous lows and the 61.8% Fibonacci retracement level based on the 2018 - 2019 upswing is just a bit over $1 lower than yesterday's closing price. This means that the short-term decline is likely over or very close to being over.
That's based on the price moves. Now, considering the aspect of time, we get another indication that at least a brief turnaround is likely. Crude oil has been declining relentlessly for the past 7 trading days. There was no similar case when that happened in 2019. The most recent similar case is when crude oil declined in the fourth quarter of 2018. Interestingly, it happened at relatively similar price levels. The red rectangles that we used to mark the above are identical. If crude oil declines to $51 here, the size of the relentless declines will be practically identical. And history tends to rhyme.
That's exactly what happened. Crude oil declined to $51.01 and the sizes of the declines are practically identical. At least a short-term rebound is now likely.
The Stochastic indicator just flashed a tiny (but still valid) buy signal which serves as an additional confirmation of the current bullish move.
Consequently, in our view, the current long position is justified from the risk-reward point of view.
Trading position: Long position in crude oil with a stop-loss order at $49.88 and the binding profit-take target at $55.88 is justified from the risk/reward perspective.
Forex Analysis
As far as the currency market is concerned, Nadia usually covers the individual currency pairs. However, that's not what I specialize in, so instead of the usual format of these analyses, I will maximize their usefulness and likely profitability. This means that instead of focusing on individual currency pairs, I will cover the USD Index, as that's what I've been following on a regular basis for years.
It's also tradable, as there are futures on it (DX symbol) as well as ETFs, for instance the UUP and the UDN. The key development that might distort the price movements will take place on Friday, so the market is likely to move according to its trend until that time. Friday's price movement might be a bit more chaotic, though.
And which way is the current main trend pointing?
In the same direction as yesterday.
Up.
Our previous comments on the long-term charts remain up-to-date:
The USD Index is after a major long-term breakout and this breakout was already verified a few times. The most recent rally is just the very early part of the post-breakout rally. Much higher USD Index values are likely to follow in the upcoming months.
The long-term trend is up as even the dovish U-turn by the Fed, rate cuts, and myriads of calls from President Trump for lower U.S. dollar and much lower (even negative) interest rates, were not able to trigger any serious decline.
What we saw instead was a running correction that's the most bullish kind of corrections. It's the one in which the price continues to rally, only at significantly smaller pace.
Even though the USD Index is likely to soar in the following months, it doesn't mean that it has to start moving sharply higher right away. Let's check the short-term chart for details.
In yesterday's analysis we commented on the shape of the pre-market session in the following way:
(...) it turned out it was a good decision to wait for the additional confirmation instead of entering the trade yesterday. Right now, we might see a sharp breakout anyway, but given Tuesday's reversal and yesterday's decline that seems doubtful. Instead, we might see a decline to the rising red support line or to the 50-day moving average (marked with blue).
This means about a 0.6 downswing.
It might be a good idea to wait for the market to decline on Friday or shortly thereafter and enter a long position then. Practically each time after the Fed speech, interest rate decision or strong criticism from Trump, the USD Index declined but then rose back up. It might be a good idea to wait for this initial slide and then enter a position that's in tune with what usually happens. Of course, if the USD Index breaches through the rising red support line and the 50-day moving average, it will be likely to slide further before the rebound takes place. So, we plan to wait for the USD Index to bottom and perhaps enter a long position at that time.
Some traders may want to enter a short position here, but we prefer to enter a trade that's in tune with the main trend (up) as it's easier to wait such trades out if the entry price turns out to be less than perfect.
In short, the above remains up-to-date. The USD Index is declining, but it didn't reach the aforementioned support levels: the rising red support line or the 50-day moving average. This means that lower USD values could still be seen before another rally takes place. The downside is too limited for us to be opening a short position, considering especially that it is against the major trend.
There's not much action in the currency market this week, but it seems that it's better to simply wait out the unclear times while sitting on profits from the previous trade (please note how the British pound rebounded shortly after we closed the short position in it on Monday) than to take unnecessary risks.
Trading position (short-term; our opinion): No position in the USD is justified from the risk/reward perspective at the moment of writing these words.
On an administrative note, next week's Alerts might be shorter than usual, as your Editor will be traveling to Athens to attend the Stoicon philosophical conference.
As always, we will keep you - our subscribers - informed.
Thank you.
Sincerely,
Przemyslaw Radomski, CFA
Editor-in-chief, Gold & Silver Fund Manager
