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Trading Lessons

Crude Oil Price Reverses - Was that THE Bottom?

Commodities / Crude Oil Aug 13, 2015 - 06:23 PM GMT

By: Nadia_Simmons

Commodities

Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective.

Crude oil declined yesterday, but the session was not without a rebound. In fact, the move higher continues also today as black gold is at almost $44. Have we just seen a major triple bottom in crude oil?


This could be the case, but for now it's not very likely. We are not seeing substantial signs of strength while we should have been seeing them it if we were after a major bottom. It seems likely, however, that we are seeing a local bottom. Let's take a closer look at the charts to find out (charts courtesy of http://stockcharts.com).

In our previous commentary, we wrote the following:

(...) Crude oil is about to reach its strong support, so we can expect to see a corrective upswing relatively soon (...) Precisely, crude oil moved below the first of the horizontal support levels, but is about to reach the combination of the second one (Jan 2015 low) and the declining red support line, which could trigger a bigger corrective upswing.

From today's point of view, we see that the commodity reversed and rebounded after a drop to the above-mentioned support area. Thanks to this upswing, light crude invalidated earlier breakdown under the first of the horizontal lines and the green support/resistance line based on the previous lows. This is a positive signal, which suggests that we could see further improvement - especially when we factor in the size of volume that accompanied yesterday's move (it was much bigger compared to what we saw in previous days). Additionally, the RSI and Stochastic Oscillator generated buy signals, suggesting that reversal may be just around the corner.

If this is the case and the commodity increases from here, the initial upside target would be around $45.52, where the upper line of the blue declining trend channel is. However, if this resistance is broken (and given the significance of the support levels that are being currently reached it seems quite likely that it will be broken), the next upside target would be around $47.05-$47.71, where the Apr low and the 23.6% Fibonacci retracement (based on the entire Jun-Aug decline) are.

The above remains up-to-date. Crude oil moved once again to the declining red support line and reversed. It continues to rally also today (being at $43.70 at the moment of writing these words) and while a daily rally is not very significant on its own, in light of the support levels that were just reached, it is a bullish signal.

Summing up, the situation in crude oil is now more bullish than not for the short term, but it's not bullish yet to justify opening long positions in our opinion. We believe that the outlook for crude oil is not bearish enough to justify opening another short positions either. In fact, we believe that taking profits off the table yesterday was a good idea. We will continue to monitor the market, look for another profitable trading opportunity and report to you accordingly.

Very short-term outlook: mixed
Short-term outlook: mixed
MT outlook: mixed with bearish bias
LT outlook: mixed with bearish bias

Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective. We will keep you - our subscribers - informed should anything change.

Thank you.

Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski
Founder, Editor-in-chief

Sunshine Profits: Gold & Silver, Forex, Bitcoin, Crude Oil & Stocks
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Disclaimer

All essays, research and information found above represent analyses and opinions of Nadia Simmons 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 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. Nadia Simmons is not a Registered Securities Advisor. By reading Nadia Simmons’ 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. Nadia Simmons, 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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