Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective.
On Wednesday, crude oil moved higher once again, hitting fresh highs after bullish EIA weekly report. As a result, light crude gained 2.18% and closed the day above $51. Will we see further rally in the coming days?
Although the U.S. Energy Information Administration showed that gasoline inventories rose by 1.0 million barrels and distillate stockpiles increased by 1.8 million barrels, the report also showed that crude oil inventories dropped by 3.2 million barrels for the week ending on June 3. Thanks to this decrease, light crude extended gains and closed the day above $51. Will we see further rally in the coming days? Let’s examine the daily chart and find out what can we infer from it (charts courtesy of http://stockcharts.com).
Yesterday, we wrote the following:
(…) crude oil (…) invalidated earlier breakdown under the lower border of the black rising wedge, which triggered further improvement and resulted in a fresh 2016 high of $50.53. Although the commodity gave up some gains in the following hours, light crude closed the day above the barrier of $50 inside the rising wedge.
Taking these facts into account and combining them with buy signal generated by the Stochastic Oscillator, it seems that the commodity will move higher once again and test the Oct 9 high of $50.92 or even climb to the previously-broken medium-term green line (currently around $51.35) in the coming day(s).
Looking at the daily chart, we see that the situation developed in line with the above scenario and crude oil increased to the previously-broken medium-term green line, which may be a verification of earlier breakdown. If this is the case, the commodity will reverse and decline to the Oct high of $50.92 or the May 26 high of $50.21. If this area withstands the selling pressure, light crude will likely rebound and test yesterday’s high. However, if it is broken, we may see a drop to the blue support line based on the late May and Jun lows.
Finishing today’s alert, it’s worth keep in mind that the RSI climbed above the level of 70, while the CCI and Stochastic Oscillator are overbought, which suggests that reversal in the coming days is very likely.
Summing up, crude oil moved higher once again and hit a fresh 2016 high, increasing to the previously-broken medium-term green line, which may be a verification of earlier breakdown. If this is the case, the commodity will pull back in the following hours and test Oct or May highs, which serve now as the nearest supports.
Very short-term outlook: mixed with bearish bias
Short-term outlook: mixed
MT outlook: mixed
LT outlook: mixed
Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective. We will keep you – our subscribers – informed should anything change.
Thank you.
Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief
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