Crude oil was rejected at its resistance yesterday, and follow-through selling came in the footsteps. With the ongoing OPEC meeting and inventories report, will the bulls get an ally in their renewed push higher?
Trading position (short-term; our opinion): No position is justified from the risk/reward perspective.
Let's take a closer look at the chart below (chart courtesy of www.stooq.com ).
In yesterday's Oil Trading Alert, we wrote that the bulls would seek to test the red resistance zone created by the upper border of the rising green trend channel and the last week's peaks.
Indeed, the buyers took crude oil futures higher as we had expected, testing the nearest resistances. However, they didn't manage to push the futures higher, and black gold pulled back before the closing bell.
This show of weakness encouraged the sellers to act, and the futures opened today with the pink gap. There was further deterioration in the following hours, which doesn't bode well for the bulls.
Let's remember that the OPEC meeting is underway, and we'll also get inventory data from the U.S. Energy Information Administration later today. Both events can bring about more volatility. Therefore, we are waiting on the sidelines, waiting for more clues as to the upcoming moves.
Before summarizing today's Alert, we'll present you with two possible scenarios.
The Bullish Scenario
The buyers manage to close today's gap and we'll see a retest of the upper border of the rising green trend channel and the red resistance zone.
The Bearish Scenario
Crude oil futures extend losses and we'll see a decline to the lower border of the rising green trend channel.
Summing up, the buyers indeed retested the red resistance zone yesterday, but black gold pulled back before the day was over. Today's opening pink gap followed by another push lower doesn't bode well for the bulls. Once the OPEC meeting and inventory data volatility is over, more clues as to the upcoming move will emerge. Until then, we're keeping our powder dry.
Trading position (short-term; our opinion): No position is justified from the risk/reward perspective.
Thank you.
Nadia Simmons
Forex & Oil Trading Strategist
