Can The Oil Bulls Extend The Sputtering Rally?

The series of higher oil prices appears to be over as today, we might see the bulls’ power tested. Where can the bears aim realistically and what is most likely to happen next? These are certainly valid questions as the oil price has reached an important resistance and appears hesitating today. Will some geopolitical news come to the rescue? High time to dive in...

Let’s take a closer look at the charts below (charts courtesy of http://stockcharts.com and www.stooq.com ).

Yesterday c,rude oil went on to test not only the late-May peak, but also the declining blue resistance line. Nevertheless, there was no daily close above the blue line. Instead, the bulls gave up half of their gains, and oil closed well below this resistance.

We have already seen a similar price action on May 20 and also the following day. Back then, such moves preceded a sizable downswing, which increases the likelihood of at least a brief reversal from current levels.

The bearish outlook is also reinforced by the current position of the daily indicators and bearish divergence between the crude oil price and the Stochastic Oscillator.

Additionally, yesterday’s upswing materialized on smaller volume than what we saw a day earlier during the small pullback. It raises some doubts about the bulls’ strength.

Please note that the recent upward move took crude oil futures (as seen on the first chart) to the orange resistance area created by the early- and mid-May lows (marked with yellow on the second chart). This area is also reinforced by the 61.8% Fibonacci Retracement.

What does it mean going forward? Even if the bulls manage to push the oil price higher, the space for gains looks limited.

On the other hand, crude oil futures have recently opened with gaps (marked with green). These call for the bears close them first before any sizable move to the downside.

Summing up, the bulls have reached an important resistance and despite the ongoing and increasing bearish divergence in the CCI, they have retained a certain degree of control. While the oil market is set for a lower open today, one more upswing remains probable before any correction of recent sizable gains gets a chance to set in. As for now however, there’s no opportunity worth acting upon in the oil arena.

The full analysis also covers the evaluation of our yesterday oil moves’ expectations and the most likely scenario for the immediate term price developments. You are welcome to check more of our free articles on our website, including this one. If you enjoyed the above analysis and would like to receive daily premium follow-ups, we encourage you to sign up for our Oil Trading Alerts also benefit from the trading action we describe. We encourage you to sign up for our daily newsletter, too - it's free and if you don't like it, you can unsubscribe with just 2 clicks. If you sign up today, you'll also get 7 days of free access to our premium daily Gold & Silver Trading Alerts. Sign up for the free newsletter today!

Nadia Simmons

Forex & Oil Trading Strategist

Sunshine Profits - Tools for Effective Gold & Silver Investments

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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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