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

On Thursday, crude oil extended losses, which resulted in a drop under the first support zone. Is it enough to trigger further declines?

Let’s check the daily chart and find out what can w infer from it about future moves (charts courtesy of http://stockcharts.com).

On Wednesday, we wrote:

(…) Taking into account sell signals generated by the indicators, we think that light crude will move lower once again and test the late-May low of $47.40 or even the Apr high of $46.78 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 slipped under the Apr high. As you see with this move light crude reached the next support zone (created by the Apr and early May highs and the 50-day moving average), which suggests that we may see a rebound from here in the coming day(s). If this is the case, crude oil may increase even to around $48.63, where the previously-broken blue line (which serves as the nearest resistance at the moment) currently is. Finishing today’s alert it’s worth noting that the size of volume that accompanied yesterday’s decline was smaller than earlier this week, which increases the probability of reversal.

Summing up, crude oil slipped to the next green support zone, which in combination with the size of yesterday’s volume suggests reversal in the coming day(s).

Very short-term outlook: mixed
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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