Oil Trading Alert: Oil's Sharp Rally and Its Implications

By: Przemyslaw Radomski & Nadia Simmons | Mon, Aug 31, 2015
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Oil Trading Alert originally published on Aug 31, 2015, 6:06 AM


 

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

The crude oil moved sharply higher on Thursday and Friday and it erased many daily declines during these 2 sessions. Nobody can deny that these moves were significant, but what about their implications? Are they significant as well?

In short, we think that they are meaningful to the extent that they changed the very short-term trend, but they didn't change the medium-term one. We got stopped out of our previous short position, but we believe that it was good decision for us to place the stop-loss order at these levels in the first place as they correctly took us out of the market when the outlook changed. Besides, the loss on this position is small compared to the profits that we made on the previous short position - it's just a part of the process (there have to be losing trades every now and then; it's important to have profits over the long run).

If the medium-term trend didn't change, then why isn't to a good idea in our opinion to stay on the short side of the market? Let's take a look at the chart (chart courtesy of http://stockcharts.com).

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

The answer is that because of last week's strength, crude oil is likely to move even higher temporarily (on a short-term basis) before turning south again. The next meaningful resistance level is a few dollars higher (at $47 or so due to the combination of the 38.2% Fibonacci retracement level and the declining resistance line) and since that's a quite likely target we see no point in holding a short position open - instead, we will focus on the confirmations of the local top and re-entering the short position and more favorable prices.

Confirmations are particularly important because crude oil could easily move even higher - to $52 or so and still remain in a medium-term downtrend and we don't want to get in the market several dollars too early.

Given the sharpness of the recent rally, it could be the case that the above-mentioned target levels will be reached relatively soon, if we get bearish confirmations shortly as well, we'll likely re-enter the short positions with even greater profit potential than the previous positions had. As always, we'll keep you informed.

Summing up, crude oil rebounded sharply in the final part of last week and the very short-term trend is now bullish. Consequently, we believe that waiting with re-entering short positions for even higher prices is currently the best approach to the crude oil market. Well keep you - our subscribers - informed.

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

 


 

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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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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