Oil Trading Alert: Crude Oil - Sinking or Rebounding?

By: Nadia Simmons & Przemyslaw Radomski | Tue, Aug 18, 2015
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Oil Trading Alert originally published on Aug 17, 2015, 9:04 AM


 

Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective.

Although crude oil climbed above $43.50 on Friday, the combination of a stronger greenback and the Baker Hughes report pushed the commodity lower. As a result, light crude gained 1.28%, but closed the day below important resistance zone. What's next?

Friday's data showed that U.S. producer prices were higher for a third straight month in July and factory output increased at the fastest rate in eight months, which supported the greenback and made crude oil less attractive to users of other currencies. Additionally, Baker Hughes reported that U.S. oil rigs increased by two to 672 last week for the week ending on August 7, marking the fourth straight week of weekly builds. In these circumstances, light crude gave up some gains, but closed the day above the March low, invalidating earlier breakdown. Will we see higher values of the commodity in the coming week? (charts courtesy of http://stockcharts.com).

Light Crude Oil Weekly Chart
Larger Image

Looking at the weekly chart we see that although crude oil slipped under the March low, the commodity rebounded and closed the week above this important support level.

What impact did this move have on the very short-term picture? Let's examine the daily chart and find out.

Light Crude Oil Daily Chart
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From this perspective, we see that crude oil moved little higher on Friday and invalidated the breakdown under the March low. Although this is a positive signal, which suggests further improvement, light crude is still trading under the solid resistance zone created by the green and blue declining resistance lines and also the green horizontal line based on the Jan low. Additionally, Friday's move is quite small (compared to previous upward moves marked with blue) and materialized on tiny volume, which means that oil bulls are not as strong as it seems at the first sight.

What does it mean for the commodity? In our opinion, all the above in combination with the current position of the indicators (there are no buy signals, which could encourage oil bulls to act) suggests that another test of the support area created by the March low and the red declining support line is very likely. Nevertheless, we believe that the risk of re-entering short positions is too high at the moment. The reason? We think that the best answer to this question will be the quote from our previous Oil Trading Alert:

(...) Please consider the way crude oil declined in January 2015. Black gold declined sharply at first, but the final days (and weeks) of the decline were not sharp - crude oil declined slowly and the thing that was indeed sharp, was the corrective upswing that we saw in the final part of the month. We wouldn't want to be holding short positions should something like that happened once again and the risk of such action is not negligible.

Summing up, crude oil moved higher and invalidated earlier breakdown under the March low. Despite this (seemingly positive) development, light crude remains under the solid resistance zone, which increases the probability of another test of the red declining support line. Nevertheless, in our opinion, the outlook for crude oil is not bearish enough to justify opening another short positions - at least not yet. We're happy with the profits that we took off the table recently and we don't want to risk losing capital before a trade is really justified from the risk/reward point of view. We will continue to monitor the market, look for another profitable trading opportunity and report to you accordingly.

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

Trading position (short-term; our opinion): No positions 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
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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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