Oil Reverses Lower Faster Than You Can Blink

Although oil bulls managed to push the futures higher and broke above the upper border of the rising green trend channel during yesterday’s session, Monday’s upswing turned out only temporary.

Earlier today, crude oil futures opened the day with the bearish pink gap, invalidating yesterday’s breakout above the channel. This bearish development triggered further deterioration in the following hours, which means that our yesterday’s analysis is up-to-date also today:

(…) the sizable red gap remain in play. It keeps supporting the bears and lower values of the futures in the coming week(s).

Let’s take a look at the weekly crude oil chart. The volume is progressively declining, raising doubts about the bulls’ strength going forward.

Let’s zoom even further out, and inspect the monthly chart.

The long-term perspective shows that recent weeks’ price action hasn’t really changed the overall situation much. Crude oil is still trading inside the blue consolidation below three key resistances (the red and orange bearish gaps and the 61.8% Fibonacci retracement), which form a major resistance zone for the coming week(s).

Additionally, the volume is decreasing on a monthly basis, which raises the probability of a reversal in the near future.

Therefore, as long as there is no breakout above the said consolidation, another move to the downside would not surprise us and reversal in the coming week(s) is very likely.

Taking all the above into account, we continue to think that lower values of crude oil and crude oil futures are ahead of us. Should it be the case and the futures move lower, the first downside target will be the green gap created on Thursday. If it is closed, the next target will be the lower border of the purple consolidation and the next green gap, which is where our initial downside target currently is.

Summing up, yesterday’s crude oil gains have evaporated in a flash as the red gap ahead coupled with the extended position of the daily indicators brought a reversal lower. The short position continues being justified from the risk-reward perspective, and it is supported by both the weekly and monthly perspectives.

We hope you enjoyed reading the above free analysis, and we encourage you to read today's Oil Trading Alert - this analysis' full version. It includes more details about which levels to watch and why. There's no risk in subscribing right away, because there's a 30-day money back guarantee for all our products, so we encourage you to subscribe today.

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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.

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