Crude oil has had an eventful session yesterday. It has closed the opening gap and the bulls have been building upon their gains till the session’s close. Earlier today however, the price appears to be rolling over and heading south. Is all hope for higher oil lost? The bulls have shown to be quite tireless. Can they pull a rabbit out of their hats shortly?
Let’s take a closer look at the chart below (chart courtesy of http://stockcharts.com).
Yesterday’s session started with a sizable gapping move down that reversed later in the day. The gap has been closed as testing the 200- and 50-day moving averages encouraged the buyers to act.
They’ve taken the commodity to almost $63 but the previously-broken red horizontal resistance line (based on mid-April lows) stopped them. Such price action looks like verification of the earlier breakdown and suggests that another attempt to move lower may be just around the corner.
The daily indicators would support such a scenario. They are free from any buy signals. Therefore, if oil moves down from here, we’ll likely see another test of the 200- and 50-day moving averages. Such a test would then be likely followed by a drop to the first green support zone or even the 38.2% Fibonacci retracement.
Summing up, the outlook for oil remains bearish. Monday’s reversal of the gap brought higher prices but appears to be rolling over. This is what a verification of the breakdown below the red horizontal resistance line that’s based on mid-April lows looks like. There’re no buy signals on the daily indicators while the weekly ones remain on sell signals. The bearish divergences between the daily indicators and the oil price itself are getting their downward price resolution. The profitable short position continues to be justified.
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Forex & Oil Trading Strategist
THIS ARTICLE ORIGINALLY POSTED HERE.