Trading position (short-term; our opinion): Long positions (with a stop-loss order at $42.95 and initial upside target at $50) are currently justified from the risk/reward perspective.
On Monday, crude oil gained 1.18% after Iranian President Hassan Rouhani supported a decision to raise the price of the commodity and join OPEC in stabilizing the oil market. Thanks to this news, light crude broke above the resistance zone and closed the day above $48. Will we see a attest of the barrier of $50 in the coming days?
Let’s examine the charts below and find out (charts courtesy of http://stockcharts.com).
Quoting our yesterday’s summary:
(…) light crude re-approached the upper border of the first resistance zone, which could pause further rally. Nevertheless, buy signals generated by the indicators in combination with the size of volume that accompanied last week’s move suggest that further improvement is just around the corner.
From today’s point of view we see that oil bulls pushed the commodity higher as we had expected. Thanks t yesterday’s increase light crude broke above the upper border of the red resistance zone, which means that what we wrote in our Thursday’s alert remains up-to-date also today:
(…) when we take a closer look at the above chart, we can notice several bullish factors. (…) the Stochastic Oscillator generated a buy signal once again, supporting further improvement. (…) crude oil climbed above the red dashed declining resistance line based on the Aug and Sep highs (this resistance was strong enough to keep light crude under $46 since last Thursday).
Taking all the above into account, we think that higher prices of crude oil are just around the corner – even if light crude gives up some (…) gains before another move to the upside. In this case, we’ll see a test of the red resistance zone and if it is broken, the next upside target would be the barrier of $50.
Finishing today’s alert, we would also like to draw your attention to the quote from yesterday’s alert:
(…) crude oil broke above the upper border of the blue consolidation, which is a positive event that suggests further improvement in the coming week. Additionally, the Stochastic Oscillator generated a buy signal and the size of the volume that accompanied last week’s upward move was huge (the biggest in more than two years), which confirms oil bulls’ strength and supports higher prices of the commodity (in our opinion, light crude will test the red resistance zone marked on the weekly chart) in near future.
Summing up, crude oil extended gains and broke above the first resistance zone, which in combination with buy signals generated by the indicators and the size of volume that accompanied last week’s move suggest further improvement and a test of the barrier of $50 in the coming days.
Very short-term outlook: bullish
Short-term outlook: mixed with bullish bias
MT outlook: bullish
LT outlook: mixed
Trading position (short-term; our opinion): Long positions (with a stop-loss order at $42.95 and initial upside target at $50) are currently justified from the risk/reward perspective. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
As a reminder – “initial target price” means exactly that – an “initial” one, it’s not a price level at which we suggest closing positions. If this becomes the case (like it did in the previous trade) we will refer to these levels as levels of exit orders (exactly as we’ve done previously). Stop-loss levels, however, are naturally not “initial”, but something that, in our opinion, might be entered as an order.
Thank you.
Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief, Gold & Silver Fund Manager
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