Crude Oil’s Reversal Sparks Our New Trading Decision

Yesterday’s oil session was indeed heavy on action. The initial upswing gave way to a reversal lower, leaving black gold to close almost unchanged. Well, it finished a bit lower than it opened the day actually. Does this signify something important? That important that it would make us act? You bet – let’s dive in to the juicy details.

Let’s take a closer look at the chart below (chart courtesy of www.stooq.com ).

The oil bulls took black gold all the way to the orange resistance zone yesterday, just a bit shy of the 61.8% Fibonacci retracement. They didn’t hold on to the gained ground however, and oil closed the day slightly below the declining blue resistance line.

This is certainly similar to what we have seen recently. Let’s recall these words of our June 27th Alert – back then, crude oil futures have first hit the declining blue resistance line:

(…) Crude 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.

This suggests we could see further declines in the coming days, just like back then. Indeed, crude oil is trading at around $58.20 as we speak.

Earlier today, the bulls have failed to bring light crude prices higher for a fifth time in a row already. That also increases the probability of reversal’s sustainability and lower prices down the road.

Summing up, after yesterday’s session that ended almost in a draw, the bears are making themselves heard. The technical posture has deteriorated as crude oil has been rejected at the orange resistance zone yesterday and went on to trade solidly below the declining blue resistance line. The daily indicators complete the picture. Therefore, opening a short position is justified.

The full analysis also covers the evaluation of the daily indicators’ signals, aided by the recent fundamental news. 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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