Oil Trading Alert: Non-USD Picture of Crude Oil

By: Nadia Simmons & Przemyslaw Radomski | Wed, Nov 16, 2016
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Oil Trading Alert originally published on Nov 15, 2016, 10:01 AM


 

Trading position (short-term; our opinion): Long positions (with a stop-loss order at $41.39 and initial upside target at $49.53) are justified from the risk/reward perspective.

Although crude oil moved lower after the markets open, oil bulls stopped further deterioration and triggered a rebound in the following hours. As a result, light crude erased most of earlier losses and closed the day above Friday's low. What can we expect in the coming days?

Let's examine the charts below and try to find out (charts courtesy of http://stockcharts.com).

Light Crude Oil Weekly Chart
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Looking at the weekly chart, we see that although crude oil moved little lower this week, the 50-week moving average continues to keep declines in check.

Are there any other technical factors that could encourage oil bulls to act in the coming days? Let's examine the day and find out.

Light Crude Oil Daily Chart
Larger Image

Yesterday, we wrote the following:

(...) Today's move lower in crude oil below $43 (to about $42.50) could be viewed as a breakdown below the September lows, but we don't view it as such - at least not yet. The reason is that today's session is far from being over and the move below $43 was almost invalidated. Depending on the closing price, we could see (...) a reversal and invalidation of the intra-day breakdown, which would be very bullish.

From today's point of view, we see that the situation developed in line with the above scenario and crude oil rebounded, invalidating the intra-day breakdown below the September lows, which is a bullish signal that suggests further improvement.

Additionally the current situation in the non-USD (WTIC:UDN ratio) chart of crude oil also supports the pro-growth scenario. Why? Let's take a closer look at the charts below and find out.

Light Crude Oil/UDN Weekly Chart
Larger Image

From the weekly perspective, we see that although the ratio moved lower and erased almost all of the last week' gains, the green support zone (reinforced by the 50-week moving average) continues to keep declines in check, which is a positive signal.

Light Crude Oil/UDN Daily Chart
Larger Image

On top of that, the first thing that catches the eye on the daily chart is a positive divergence between the ratio and the price of crude oil. As you see, although the black gold hit a fresh low yesterday, we didn't see such price action in the case of the ratio, which is a bullish signal that suggests further improvement. Why we think so? When we take a closer look at the above chart, we can notice a similar situation in September (both cases we marked with green rectangles). Back then such event encouraged oil bulls to act, which resulted in a rebound that finally took the ratio (and also crude oil) to fresh 2016 highs. Additionally, a buy signal generated by the CCI remains in place, supporting oil bulls and another attempt to move higher.

Therefore, if we see such price action, the upside targets from our Thursday's alert would be in play:

(...) If (...) light crude extends gains, we'll likely see an upward move to (at least) (...) the previously-broken red and black resistance lines (...)

Summing up, crude oil moved higher and invalidated earlier breakdown under the September lows, which in combination with the current situation in the WTIC:UDN ratio suggests that higher prices of the black gold are just around the corner.

Very short-term outlook: bullish
Short-term outlook: bullish
MT outlook: mixed
LT outlook: mixed

Trading position (short-term; our opinion): Long positions (with a stop-loss order at $41.39 and initial upside target at -$49.53) are justified from the risk/reward perspective.

Thank you.

 


 

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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