How Low Could Crude Oil Go?

Although crude oil climbed above the level of $50 yesterday, this improvement was very temporary and the black gold closed the day below this barrier. In this way light crude invalidated the earlier breakout, which will likely trigger further declines. How low could the commodity go in the coming days?

Crude Oil’s Technical Picture

Let’s take a closer look at the charts and find out what are they telling about future moves (charts courtesy of http://stockcharts.com).

Today’s essay will be quite short, because the technical picture of the commodity hasn’t changed much and the short-term outlook remains bearish. As we mentioned earlier, light crude moved a bit higher after yesterday’s market’s open, which resulted in a climb above the barrier of $50. As it turned out, this improvement was very temporary and the black gold erased earlier gains in the following hours, closing the day below $50.

Breakout’s Invalidation

In this way, the commodity invalidated the earlier tiny breakout, which pushed the black gold lower earlier today. How low could light crude go in the coming days? We believe that the best answer to this question will be the quote from our yesterday’s alert:

(…) if we take a closer look at the size of volume, we see that it was much smaller than a day earlier, which suggests that oil bulls are weaker than their opponents at the moment.

Additionally, the sell signals generated by the daily indicators remain in place, supporting oil bears and lower prices of the black gold. If this is the case and crude oil moves lower, the first downside target will be the long-term green support line based on the August and November lows (currently around $48.53). If crude oil drops under this important support, the next target for oil bears will be around $45.55, where the previously-broken lower border of the red declining trend channel is.

Summing up, short (already profitable) positions are justified from the risk/reward perspective as crude oil invalidated the small breakout above the barrier of $50. This negative development together with the sell signals generated by the indicators suggests lower prices of the black gold in the coming days. If you enjoyed today’s analysis and you’d like to be updated on the following articles on crude oil, gold and other markets, we encourage you to sign up for our free mailing list. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today.

Nadia Simmons

Forex & Oil Trading Strategist

Przemyslaw Radomski, CFA

Founder, Editor-in-chief, Gold & Silver Fund Manager

Stay updated: sign up for our free mailing list today

* * * * *

Disclaimer

All essays, research and information found above represent analyses and opinions of Nadia Simmons and 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, Nadia Simmons, Przemyslaw Radomski, CFA and their 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. Nadia Simmons and Przemyslaw Radomski, CFA are not Registered Securities Advisors. By reading Nadia Simmons’s and Przemyslaw Radomski’s, CFA reports you fully agree that they 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. Nadia Simmons, 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.