Capitalizing On Plunging Oil As Iran Tensions Subside

Yesterday, we wrote:

(…) Although crude oil futures moved higher after Wednesday’s open and broke above the previous peaks, this improvement was very temporary, and the bears took over in the following hours.

As a result, the futures came back below the lower border of yesterday’s red gap, creating a very long upper shadow. This is clearly a bearish sign, suggesting further deterioration.

(…) Should it be the case and the futures extend losses from here, we’ll likely see a decline to at least the nearest bullish green gap created in mid-December. This is where also the 38.2% Fibonacci retracement is, which together with the gap serves as the closest short-term support.

The situation indeed developed in tune with the above scenario, and crude oil futures declined sharply during yesterday’s session to our downside target, making our short positions profitable.

Despite this drop, the gap remains open and the above-mentioned Fibonacci retracement continues to serve as a support. These suggest that we could see a rebound from here in the very near future. Therefore, closing short positions and taking sizable profits off the table (as a reminder, we opened them when crude oil futures were trading at around $62.80) is justified from the risk/reward perspective.

Nevertheless, should we see a successful drop below these supports, we’ll likely reopen short positions. We may even reopen them at higher levels after the futures rebound.

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Nadia Simmons

Forex & Oil Trading Strategist

Sunshine Profits - Effective Investments through Diligence and Care

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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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