Is The Oil Bulls’ Fate Hanging In The Balance?

We’ve raised some doubts about the bulls’ power to succeed yesterday. Indeed, they gave up most of their gains before the closing bell. Today, we haven’t seen even an upswing attempt that would fizzle out. So, is it a case closed? Given all the breaking oil news and data, what do the charts really reveal about oil going forward?

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

The daily chart shows that crude oil remains below the previously-broken lower border of the red rising wedge. Yesterday’s upswing was bullish only at first sight and anyway, the bulls gave up most of their gains before the session was over. Our yesterday’s reservations about the bulls’ power (as expressed in the Alert’s title) were justified. Our subscribers haven’ t been surprised about the possibility of oil attempting to move higher and verifying its breakdown below the rising red wedge.

Earlier today, we’ve seen a tentative move lower and black gold currently trades at around $63.55. Even that is lower than yesterday’s closing price.

The daily indicators continue to support the bears. Also the volume of yesterday’s upswing was markedly lower than the volume of the preceding downswing. This is a clue doubting the commitment and strength of the bulls. And this is the second clue in a row as Monday’s volume has also been much lower.

Let’s discuss the targets of this oil downswing. Our subscribers have read these words on Monday. They remain up-to-date also today:

(…) Taking into account the shape of the current decline, black gold could move even lower than the first green support zone. It could visit the second green support zone because there the size of the decline would correspond to the height of the wedge that the oil price has broken down from.

Summing up, the outlook remains bearish. We’ve just seen a verification of the breakdown below the rising red wedge. The volume of yesterday’s modest upswing was much lower than that of the preceding downswing and most of the gains evaporated before the session was over. The daily indicators remain on sell signals. The bearish divergences are in place and the short position is justified from the risk-reward point of view. Finally, today’s price action doesn’t have a whiff of bullish air and oil price volatility looks bound to pick up.

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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.