Crude Oil Going Nowhere Despite The Rising Tensions And Supply Cuts?

Crude oil bulls proved weaker and the strength they attempted to project yesterday, evaporated to a considerable degree. Neither today, do they appear any stronger. Given the rising geopolitical tensions in the Middle East, one could expect a stronger performance. Additionally, OPEC and Russia appear to be close to agreement on their oil supply coordination. Turning to the question on everyone’s mind - is the hope for higher oil prices lost?

Let’s take a closer look at the chart below (first and third chart courtesy of http://stockcharts.com , the second one courtesy of www.stooq.com ).

Although crude oil went on a tear yesterday, the combination of the red gap and the upper border of the orange declining trend channel stopped the bulls. The upper knot is an evidence of the bulls giving up part of their gains before the day was over.

It hints at the bulls having issues overcoming the nearest resistance. It suggests their weakness. It’s true that yesterday’s volume was higher than the day before, but this is mainly due to the increased participation of both the bulls and bears in an effort to close or defend the red gap.

How did yesterday’s price action affect today's trading appetite?

Crude oil futures opened on Friday below yesterday’s closing price. There was another attempt to go north but the bears again rebuffed that.

Connecting the dots, as long as the gap remains open, lower oil prices remain ahead of us. Should we see a continuation of the reversal lower, light crude will likely test the lower border of the orange declining trend channel in the following days.

Summing up, yesterday’s upswing failed to emerge as a reversal of Wednesday’s powerful downswing and earlier today, the bulls do not appear to be any stronger. Oil is still trading well below the 38.2% Fibonacci retracement and inside the declining orange trend channel. At a minimum, one more downswing remains likely. This is supported by the position of the daily Stochastic Oscillator. The weekly chart analysis lends further support to the bearish care, especially if we get a close below the 200-week moving average later today. The short position remains justified from the risk/reward point of view.

The full analysis also covers the discussion of the weekly perspective. 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.