At the moment of writing these words, crude oil is attempting to break above its 50% Fibonacci retracement level. So far, it has been trading above it for just a few hours, so one better remain skeptical about this move just yet.
At the same time, crude oil moved above the mid-March high that the commodity made right after forming the big price gap.
This means that crude oil will have a hard time confirming this breakout. Invalidating it, on the other hand, would serve as a strong sell signal. Given the recent relatively weak performance of crude oil compared to the stock market, we think that such an invalidation is likely. Once it takes place, it will make the outlook more bearish than it is today.
Moreover, let’s keep in mind that crude oil is also right at the lower border of medium-term declining trade channel. This is a strong resistance line and crude oil approached it on relatively low weekly volume.
This is yet another reason to expect a short-term downturn in the following days and perhaps weeks, not another sizable rally. Of course, the situation will clarity once (if?) black gold invalidates its overnight breakout.
For now, the outlook for crude oil is bearish, but not significantly so.
Summing up, we think that small short positions in crude oil are justified right now.
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Day Trading and Oil Trading Strategist
Przemyslaw Radomski, CFA
Editor-in-chief, Gold & Silver Fund Manager
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All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
This article was originally posted on FX Empire