• 2 days New Study Equates Luxury Cars With Low Self-Esteem
  • 2 days Rio Tinto To Spend $1 Billion To Reduce Its Carbon Footprint
  • 3 days The Ultra-Wealthy Lost $140 Billion In One Day
  • 3 days Three Energy Casualties In The Coronavirus Crisis
  • 4 days Markets Crumble As Coronavirus Panic Peaks
  • 4 days Cobalt May Be The Key To Clean Hydrogen Fuel
  • 6 days How Taxpayers Are Bankrolling The EV Revolution
  • 7 days The Coronavirus Is Crushing China’s Car Market
  • 8 days Fighting For Survival In The Streaming War
  • 9 days Want A Job? Forget About A Bachelor’s Degree
  • 9 days Another Major Car Maker Is Backing Hydrogen
  • 10 days Are Americans Finally Sold On Soccer?
  • 10 days Is The Tech Bubble About To Burst?
  • 11 days Coronavirus Could Cost Tourism Industry $80 Billion
  • 11 days What Web Traffic Trends Can Tell Us About The World
  • 11 days Miners Face Greater Headwinds
  • 12 days Boris Johnson Proposes Billion Dollar Bridge To Northern Ireland
  • 13 days Goldman Slashes Oil Price Forecast By $10
  • 14 days Tesla Raises $2 Billion In Share Selloff
  • 15 days What The T-Mobile Takeover Of Sprint Really Means For Markets
What's Behind The Global EV Sales Slowdown?

What's Behind The Global EV Sales Slowdown?

An economic slowdown in many…

How The Ultra-Wealthy Are Using Art To Dodge Taxes

How The Ultra-Wealthy Are Using Art To Dodge Taxes

More freeports open around the…

Nadia Simmons

Nadia Simmons

Nadia is a private investor and trader, dealing in stocks, currencies, and commodities. Using her background in technical analysis, she spends countless hours identifying market…

Contact Author

Przemyslaw Radomski

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…

Contact Author

  1. Home
  2. Markets
  3. Other

Oil Trading Alert: Crude Oil under $48!

Oil Trading Alert originally published on Jul 27, 2015, 7:33 AM


 

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

On Friday, crude oil extended losses after bearish Baker Hughes report. As a result, light crude lost 1.82% and hit a fresh multi-month low. Where will the commodity head next in the coming days?

On Friday, Baker Hughes showed in its weekly report that U.S. oil rigs increased by 21 to 659, which fuelled worries over another increase in domestic crude oil inventories and weighed on investors' sentiment. In this environment, light crude moved lower once again and closed the day below $48. Will we see a fresh multi-month low in the coming days? (charts courtesy of http://stockcharts.com).

Light Crude Oil Daily Chart
Larger Image

Quoting our previous commentary:

(...) oil bulls didn't manage to hold gained levels, which resulted in a reversal and decline. With this downswing, light crude (...) hit a fresh multi-month low of $48.21, which means that lower values of light crude are just around the corner.

Looking at the daily chart, we see that the situation developed in line with the above scenario and light crude moved lower once again. Additionally, the commodity closed the day below $48, which means that the way to lower prices is open.

How low could the commodity go in the coming days? We believe that the best answer to this question will be the quote from our Friday's alert:

(...) 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).

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

Light Crude Oil Weekly Chart
Larger Image

From this perspective, we see that crude oil closed another week under the red resistance zone created by the Feb highs, which confirms that the downtrend is still in cards. Additionally, sell signals generated by the indicators remain in place, supporting oil bears and further deterioration.

Finishing today's Oil Trading Alert we would like to draw your attention to the stocks-to-oil ratio once again.

SPX:WTIC Weekly Chart
Larger Image

In our alert posted on Jul 17, we wrote the following:

(...) many times in the past (we marked them with green) local bottoms in the ratio have corresponded to local tops in crude oil. Therefore, when the ratio bounced off the 38.2% Fibonacci retracement (based on the entire rally) and moved sharply higher, we saw a decline in crude oil. Taking this fact into account, and combining it with buy signals generated by the indicators, we think that higher values of the ratio (and further declines in light crude) are just around the corner.

From today's point of view we see that the ratio extended gains (as we had expected), which translated to lower prices of crude oil. Taking into account buy signals generated by the indicators and rising volume in previous weeks (which confirms the direction of the major move), we think that the ratio will test the Mar high in the coming week(s). If this is the case, and we see such price action, light crude will extend losses hit a fresh multi-month low in near future.

Summing up, crude oil moved lower once again, hitting a fresh multi-month low and making our short positions even more profitable. Last week's decline confirms that 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 and the current picture of the stocks-to-oil ratio).

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.

 

Back to homepage

Leave a comment

Leave a comment