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

On Monday, crude oil bounced off the Fibonacci retracement and climbed to the previously-broken 50-day moving average. Will we see a verification of the earlier breakdown or further rally?

Crude Oil’s Technical Picture

Let’s take a closer look at the charts and find out (charts courtesy of http://stockcharts.com).

Yesterday, we wrote the following:

(…) the breakdown under the 50-day moving average accelerated declines, which resulted in a test of the 38.2% Fibonacci retracement based on the entire June-July upward move.

What’s next for black gold? (…) the above-mentioned 38.2% Fibonacci retracement could encourage oil bulls to push light crude higher first. If this is the case, we’ll see a rebound from current level and a test of the strength of the 50-day moving average. (…)

From today’s point of view, we see that the situation developed in line with our assumptions and crude oil increased to the 50-day moving average yesterday. Earlier today, oil bulls pushed crude oil futures higher, which suggests that the commodity will follow them in the coming hours.

How high could light crude go?

In our opinion, the initial upside target will be the last week high of $47.74. If this resistance is broken, we’ll see a test of the red resistance zone marked on the daily chart. Nevertheless, if it withstands the buying pressure and today’s move materializes on small volume, we’ll consider opening short positions.

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

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