• 4 hours Toyota Tests Solar-Powered Prius
  • 22 hours Why The Gold Rally Flatlined
  • 1 day The Uranium Sector Can’t Catch A Break
  • 2 days Upcoming Fed Meeting Has Investors On Edge
  • 2 days Global Gold Sector Outlines Responsible Mining Principles
  • 3 days China’s Giant Vampire Fund Loses $120B
  • 3 days McDonalds To Roll Out Robot Drive-Thru Clerks
  • 3 days Savvy Investors Are Betting Big On This Little Data Company
  • 4 days How The Government Is Wasting Tax Money This Year
  • 4 days Supply Concerns Halt Expansion On Tianqi Lithium Plant
  • 4 days The World’s Biggest IPO Is Almost Here
  • 5 days The Relatively Of Money And Happiness
  • 5 days Wall Street Unfazed By Recession Fears
  • 5 days SoftBank Urges WeWork To Pause IPO Plans
  • 6 days Anti-Aging Market To Hit $55 Billion
  • 6 days JPM, Morgan Stanley Take Advisory Roles In Aramco IPO
  • 6 days Are Bonds In A Bubble?
  • 7 days The Unknown Media Giant Taking The World By Storm
  • 7 days From Millennial To Millionaire With One Simple Trick
  • 8 days The 5 Most Expensive Art Pieces Ever Sold
Billionaires Are Pushing Art To New Limits

Billionaires Are Pushing Art To New Limits

Welcome to Art Basel: The…

The Problem With Modern Monetary Theory

The Problem With Modern Monetary Theory

Modern monetary theory has been…

Zombie Foreclosures On The Rise In The U.S.

Zombie Foreclosures On The Rise In The U.S.

During the quarter there were…

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: Time for Reversal?

Oil Trading Alert originally published on Aug 5, 2015, 5:33 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 Tuesday, crude oil moved higher after the market's open supported by hopes for another decline in U.S. stockpiles. Thanks to these circumstances, light crude bounced off the multi-month low and gained 1.48%. Did this increase change anything in the short-term picture of the commodity?

Yesterday, the Shanghai Composite Index increased by more than 3%, which in combination with expectations that the API and EIA reports would show another decline in domestic crude oil inventories supported the price of light crude. As a result, crude oil reversed and bounced off Monday's low. What impact did this move have on the short-term picture of crude oil? (charts courtesy of http://stockcharts.com).

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

The first thing that catches the eye on the above chart is an invalidation of the breakdown below the green support line based on the previous lows. This positive event encouraged oil bulls to act, which resulted in a rally to an intraday high of $46.23. But did this move change anything in the short-term picture? Not really. The reason? Firstly, yesterday's upswing is much smaller than previous upward moves (marked with blue). Secondly, the size of volume that accompanied Tuesday's increase is much smaller compared to what we saw in recent days. Thirdly, and most importantly, the commodity remains under the previously-broken Apr low and the 78.6% Fibonacci retracement. Therefore, what we wrote in our previous commentary is up-to-date:

(...) we believe that as long as crude oil remains below $46.72-$47.05 all upswings would be nothing more than a verification of the breakdown under the previously-broken Apr low and the 78.6% Fibonacci retracement. Therefore, in our opinion, lower values of the commodity are just around the corner (especially when we factor in the rising size of volume in the previous days, which reflects the growing strength of oil bears).

Summing up, although crude oil moved little higher, the commodity is trading under the previously-broken Apr low, which means that the downtrend remains in place and suggests that lower values of the commodity are still ahead us.

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