Oil Trading Alert: Crude Oil - At Crossroads

By: Nadia Simmons & Przemyslaw Radomski | Mon, May 19, 2014
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Oil Trading Alert originally published on May 19, 2014, 08:15 AM


 

On Friday, crude oil gained 0.61% as strong U.S. economic data and ongoing worries over the crisis in Ukraine weighted on the price. Thanks to these circumstances, light crude came back above $102, but does this growth change the short-term outlook for the commodity?

On Friday, better-than-expected numbers from the housing sector gave crude oil a support. The Census Bureau reported that U.S. building permits rose 8% to 1.080 million units last month (while analysts had expected an increase to 1.010 million units in April) and the Commerce Department showed that U.S. housing starts rose 13.2% last month to 1.072 million units, beating expectations of 980,000 gain (it was the largest increase in five months).

The commodity was also supported by heightened tensions between Russia and Ukraine as Russia informed the EU that it would stop natural-gas deliveries to Ukraine on June 1 unless it receives payments for past-due amounts. Ukraine said it is preparing to pay $4 billion to Gazprom but hopes to negotiate lower prices. These events fueled worries about the potential supply interruptions from the region and pushed the price of light crude to over $102 per barrel once again.

Will we see the commodity higher in the coming days? Let's check the technical picture of crude oil (charts courtesy of http://stockcharts.com).

Light Crude Oil Weekly Chart
Larger Image

Although crude oil gained 2.11% in the previous week, the medium-term situation hasn't changed much as the commodity still remains below both medium-term resistance lines. Therefore, what we wrote in our last Oil Trading Alert is up-to-date:

(...) we remain convinced that as long as this strong resisrance lines remain in play further deterioration is still likely. (...) from this perspective, the recent upward move seems to be nothing more than a veryfication of the breakdown. If this is the case, the bearish scenario (...) will be in play:

(...) if the commodity extends losses (...), we will likely see further deterioration and a drop even to around $95, where the medium-term support line (based on the June 2012 and January 2014 lows) is.

What can we infer from the short-term chart?

Light Crude Oil Daily Chart
Larger Image

Looking at the daily chart, we see that although crude oil moved higher once again, the very-short term situation hasn't changed much. Despite Friday's improvement, the commodity still remains below the medium-term declining resistance line (the upper line of the triangle). In our opinion, even if cude oil climbs above this line, the combination of the black rising line (the lower border of the tringle), the lower line of the rising trend channel (currently around $103) and the 61.8% Fibonacci retracement will be strong enough to stop further improvement and trigger a downswing - similarly to what we noticed on Wednesday. Please note that Friday's upswing materialized on very small volume (compared to the previous days), which questions the strength of oil bulls and reinforces the bearish scenario.

Summing up, taking all the above into account, we remain bearish and think that lower values of crude oil are still ahead us. As we have pointed out before, it seems quite likely that even if crude oil climbs higher, the above-mentioned resistance zone will be strong enough to stop further improvement and trigger a pullback in the near future. If this is the case, the nearest support will be the previously-broken 50-day moving average (currently around $100.90).

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

Trading position (short-term): Short. Stop-loss order: $104.

Thank you.

 


 

Nadia Simmons

Author: Nadia Simmons

Nadia Simmons
Sunshine Profits.com
Forex & Oil Trading Strategist
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Nadia Simmons

Nadia is a private investor and trader, dealing in currencies, commodities (mainly crude oil), and stocks. Using her background in technical analysis, she spends countless hours identifying market trends, major support and resistance zones, breakouts and failures. In her writing, she presents complex ideas with clarity that enables you to easily understand market changes, and profit on them. Nadia is the person behind Sunshine Profits' 3 premium trading services: Forex Trading Alerts, Oil Trading Alerts Alerts, and Oil Investment Updates.

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's 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.

Copyright © 2013-2014 Sunshine Profits

Przemyslaw Radomski

Author: Przemyslaw Radomski

Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Gold & Silver Investment & Trading Website - SunshineProfits.com

Przemyslaw Radomski

Przemyslaw Radomski, CFA (PR) is a precious metals investor and analyst who takes advantage of the emotionality on the markets, and invites you to do the same.

His company, Sunshine Profits, publishes analytical software that anyone can use in order to get an accurate and unbiased view on the current situation.

Recognizing that predicting market behavior with 100% accuracy is a problem that may never be solved, PR has changed the world of trading and investing by enabling individuals to get easy access to the level of analysis that was once available only to institutions.

High quality and profitability of analytical tools available at www.SunshineProfits.com are results of time, thorough research and testing on PR's own capital.

PR believes that the greatest potential is currently in the precious metals sector. For that reason it is his main point of interest to help you make the most of that potential.

As a CFA charterholder, Przemyslaw Radomski shares the highest standards for professional excellence and ethics for the ultimate benefit of society.

Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and best silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

Disclaimer: 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.

Copyright © 2009-2014 Przemyslaw Radomski, CFA

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