Oil Trading Alert: Barrier of $50 Holds - For Now

By: Nadia Simmons & Przemyslaw Radomski | Wed, Jul 22, 2015
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Oil Trading Alert originally published on Jul 22, 2015, 7:41 AM


 

Trading position (short-term; our opinion): Short positions with a stop-loss order at $65.23 are justified from the risk/reward perspective.

Although crude oil declined after the market's open, hitting a fresh multi-month low, the commodity rebounded in the following hours and closed the day above the Jul 7 low. Did this upswing change anything in the short-term picture of crude oil?

Yesterday, the USD Index moved sharply lower as investors locked in profits from the greenback's recent rally to a multi-month high of 98.31. As a result, the index dropped to an intraday low of 97.23, making crude oil more attractive for investors holding other currencies. Additionally, expectations that the API and EIA reports would show another decline in domestic crude oil inventories (after Friday's Baker Hughes report showed another drop in U.S. oil rigs) supported light crude as well. Thanks to these circumstances, crude oil climbed to an intraday high of $51.41, but did this upswing change anything in the short-term picture of crude oil? (charts courtesy of http://stockcharts.com).

Light Crude Oil Daily Chart
Larger Image

Looking at the daily chart, we see that crude oil moved lower after the market's open and hit a fresh multi-month low of $50.08. Despite this drop, the green support zone encouraged oil bulls to act, which resulted in a rebound in the following hours.

Did this upswing change anything in the short-term picture? Not really, because it was very small compared to a one-day rally that we saw on Jul 14 and it was also small relative to the size of the move lower in the USD Index. This suggests that yestrday's upswing was just a pause within a downtrend - not a beginning of a post-bottom rally.

Taking the above into account, our previous commentary is up-to-date also today:

(...) in our opinion, another acceleration of declines will be more likely if crude oil closes the day under the psychologically important barrier of $50 and the 61.8% Fibonacci retracement.

(...) If crude oil declines under the above-mentioned support zone, the next downside target for oil bears would be around $47.05-$47.55, where the Apr 10 low (in terms of an intraday and opening prices) is. If it is broken, crude oil will likely test the lower border of the support zone created by the 76.4% and 78.6% Fibonacci retracement levels (around $46.72-$47.17).

Finishing today's alert, we would like to draw your attention to yesterday's API report, which showed that crude oil inventories increased by 2.3 million barrels in the previous week. If today's EIA report confirms a built in domestic stockpiles, it would be a negative signal, which will give oil bears an additional argument to push the price lower.

Summing up, short positions in crude oil are justified from the risk/reward perspective as the downtrend remains in place, suggesting lower values of the commodity in the coming days (especially when we factor in sell signals generated by the weekly indicators).

Very short-term outlook: bearish
Short-term outlook: bearish
MT outlook: bearish
LT outlook: bearish

Trading position (short-term; our opinion): Short positions with a stop-loss order at $65.23 are justified from the risk/reward perspective.

 


 

Nadia Simmons

Author: Nadia Simmons

Nadia Simmons
Sunshine Profits.com
Forex & Oil Trading Strategist
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Nadia Simmons

Nadia is a private investor and trader, dealing in currencies, commodities (mainly crude oil), and stocks. Using her background in technical analysis, she spends countless hours identifying market trends, major support and resistance zones, breakouts and failures. In her writing, she presents complex ideas with clarity that enables you to easily understand market changes, and profit on them. Nadia is the person behind Sunshine Profits' 3 premium trading services: Forex Trading Alerts, Oil Trading Alerts Alerts, and Oil Investment Updates.

All essays, research and information found above represent analyses and opinions of Nadia Simmons and Sunshine Profits' associates only. As such, it may prove wrong and be a 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, Nadia Simmons 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. Nadia Simmons is not a Registered Securities Advisor. By reading Nadia Simmons's 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. Nadia Simmons, 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.

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Przemyslaw Radomski

Author: Przemyslaw Radomski

Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Gold & Silver Investment & Trading Website - SunshineProfits.com

Przemyslaw Radomski

Przemyslaw Radomski, CFA (PR) is a precious metals investor and analyst who takes advantage of the emotionality on the markets, and invites you to do the same.

His company, Sunshine Profits, publishes analytical software that anyone can use in order to get an accurate and unbiased view on the current situation.

Recognizing that predicting market behavior with 100% accuracy is a problem that may never be solved, PR has changed the world of trading and investing by enabling individuals to get easy access to the level of analysis that was once available only to institutions.

High quality and profitability of analytical tools available at www.SunshineProfits.com are results of time, thorough research and testing on PR's own capital.

PR believes that the greatest potential is currently in the precious metals sector. For that reason it is his main point of interest to help you make the most of that potential.

As a CFA charterholder, Przemyslaw Radomski shares the highest standards for professional excellence and ethics for the ultimate benefit of society.

Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and best silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

Disclaimer: 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 a 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.

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