Trading position (short-term; our opinion): Short positions (with a stop-loss order at $56.45 and an initial downside target at $45.81) are justified from the risk/reward perspective.

On Friday, crude oil moved a bit higher, but the key resistance area continues to keep gains in check. Will we finally see a breakthrough in the coming week?

Let’s examine the charts below to find out (charts courtesy of http://stockcharts.com).

On the weekly chart, we see that the overall situation in the medium term hasn’t changed much as crude oil is still trading in a narrow range between the previously-broken long-term red line and the red gap, which continues to keep gains in check since the beginning of the year.

Will the very short-term picture give us more clues about future moves? Let’s check.

Looking at the daily chart, we see that although crude oil moved a bit higher on Friday, the commodity is still trading in the blue consolidation under the red resistance zone. This means that as long as there is no breakout above the upper border of the formation a bigger move to the upside is not likely to be seen as the double (or even triple) top formation (created by the January 6, January 17 and Feb 2 peaks) continues to keep gains in check.

Additionally, the size of volume that accompanied Friday’s increase was smaller than day earlier during the decline, which may be the first sign of oil bulls’ weakness. We will provide you with a bigger update once we see more interesting developments on the crude oil market.

Summing up, short positions continue to be justified as crude oil remains under the previous highs and the red gap, which together continue to keep gains in check since the beginning of the year.

Very short-term outlook: bearish
Short-term outlook: mixed with bearish bias
MT outlook: mixed
LT outlook: mixed

Trading position (short-term; our opinion): Short positions (with a stop-loss order at $56.45 and an initial downside target at $45.81) are 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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