Oil Trading Alert: One-day Rebound or Something More?

By: Nadia Simmons & Przemyslaw Radomski | Thu, Aug 27, 2015
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Oil Trading Alert originally published on Aug 26, 2015, 5:53 AM


 

Trading position (short-term; our opinion): Short positions with a stop-loss order at $45.32 and profit-take order at $35.72 are justified from the risk/reward perspective.

On Tuesday, crude oil gained 4.15% after China's central bank cut interest rates. Thanks to this news, light crude reversed and invalidated Monday's breakdown under the support line. Despite this move, the commodity still remains under the barrier of $40. Will it stop further improvement in the coming days?

Yesterday, crude oil moved higher after the market's open supported by news that the People's Bank of China cut interest rates by 25 basis points to 4.6% and the reserve requirement ratio for large lenders by 0.5% to 18.0%. As a result, light crude rebounded in the following hours, climbing to an intraday high of $39.89. Will we see an invalidation of the breakdown under $40 in the coming days? (charts courtesy of http://stockcharts.com).

$WTIC Light Crude Oil - Spot Price (EOD) CME
Larger Image

Quoting our last Oil Trading Alert:

(...) we should keep in mind that, yesterday's downswing approached crude oil to the upper green support zone marked on the weekly chart below. Taking this fact into account, we think that corrective upswing from here should not surprise.

Looking at the weekly chart, we see that the situation developed in line with the above scenario and crude oil moved little higher (compared to the preceding declines).

What impact did this move have on the very short-term picture? Let's check.

$WTIC Light Crude Oil - Spot Price (EOD) CME
Larger Image

From this perspective we see that yesterday's upswing took the commodity above the previously-broken red and blue declining lines. In this way, light crude invalidated earlier breakdown below them, which is a positive signal. But is it so favorable for oil bulls as it seems at the first glance?

Looking at the daily chart we see that yesterday's upswing materialized on smaller volume than Monday's decline. Secondly, despite Tuesday's increase, the commodity is still trading under the key technical level of $40 and also below the Mar low of $42.41. Thirdly (and the most importantly), the recent rebound is smaller than previous upswings (marked with blue), which suggests that oil bulls are not stronger than they were in previous weeks.

Taking all the above into account, we believe that as long as the commodity remains under the key technical level of $40 and there is no bigger upward move (bigger than previous upswings) lower values of crude oil are more likely than not.

Summing up, although crude oil invalidated the breakdown under the red declining support line, the commodity remains under the key technical level of $40 and the Mar low. Additionally, yesterday's upswing is smaller than previous upward moves, which doesn't confirm oil bulls' strength at the moment, suggesting another attempt to move lower in the coming days.

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

Trading position (short-term; our opinion): Short positions with a stop-loss order at $45.32 and profit-take order at $35.72 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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