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Given the rising geopolitical tensions in the Middle East, one could expect a stronger performance. Additionally, OPEC and Russia appear to be close to agreement on their oil supply coordination. Turning to the question on everyone’s mind – is the hope for higher oil prices lost?
Let’s take a closer look at the chart below:
Although crude oil went on a tear yesterday, the combination of the red gap and the upper border of the orange declining trend channel stopped the bulls. The upper knot is an evidence of the bulls giving up part of their gains before the day was over.
It hints at the bulls having issues overcoming the nearest resistance. It suggests their weakness. It’s true that yesterday’s volume was higher than the day before, but this is mainly due to the increased participation of both the bulls and bears in an effort to close or defend the red gap.
How did yesterday’s price action affect today’s trading appetite?
Crude oil futures opened on Friday below yesterday’s closing price. There was another attempt to go north but the bears again rebuffed that.
Connecting the dots, as long as the gap remains open, lower oil prices remain ahead of us. Should we see a continuation of the reversal lower, light crude will likely test the lower border of the orange declining trend channel in the following days.
Summing up, Thursday’s upswing failed to emerge as a reversal of Wednesday’s powerful downswing and earlier today, the bulls do not appear to be any stronger. Oil is still trading well below the 38.2% Fibonacci retracement and inside the declining orange trend channel. At a minimum, one more downswing remains likely. This is supported by the position of the daily Stochastic Oscillator. The weekly chart analysis lends further support to the bearish care, especially if we get a close below the 200-week moving average later today. The short position remains justified from the risk/reward point of view.
The full analysis also covers the discussion of the weekly perspective. You are welcome to check more of our free articles on our website, including this one. If you enjoyed the above analysis and would like to receive daily premium follow-ups, we encourage you to sign up for our Oil Trading Alerts also benefit from the trading action we describe. We encourage you to sign up for our daily newsletter, too – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to our premium daily Gold & Silver Trading Alerts. Sign up for the free newsletter today!