Declining Oil With No End In Sight, Correct?

Time to consult the charts instead of scanning the headlines for the odds of the next move. How do they stand right now, and what kind of trading action they call for?

Let’s take a closer look at the chart below (chart courtesy of http://stockcharts.com ).

Our yesterday’s Alert was titled “Yes, Lower Prices Rule the Day As Oil Plunges Unabated” in response to our Wednesday’s rhetorical title of “Are Even Lower Oil Prices Ahead of Us?” Prior to the yesterday’s oil lows, we wrote these words on Wednesday:

(…) Crude oil has finished yesterday’s session sharply lower, slipping below $58 and making our short position even more profitable. That also marks a close below the 50-day moving average, which is another bearish factor to boot.

The volume comparison also speaks loudly – increasing volume of the downswing attests to the bears’ strength and involvement. Both the CCI and the Stochastic Oscillator have generated their sell signals, lending further support to the bears. 

Crude oil went on to extend losses during yesterday’s session, making our short positions even more profitable.

Initially, the commodity moved higher and approached the previously-broken 50-day moving average. Such price action looked to the bears like a verification of the earlier breakdown and encouraged them to act.

Crude oil then broke below its previous lows, closing the day below them. This is a bearish development, also when viewed from the volume comparison perspective. Yesterday’s decline materialized on visibly higher volume, confirming the sellers’ strength and suggesting further deterioration in the coming day(s).

The sell signals generated by the daily indicators remain on the cards, supporting another attempt to move lower.

Summing up, oil has plunged yesterday, and the increased volume attests to the strength of the bears’ involvement. Similarly to the power of the red resistance zone and the 61.8% Fibonacci retracement that we saw earlier this week, the 50-day moving average acted the same way yesterday, sending black gold even lower. The bearish divergences (between the CCI and oil prices, and between the Stochastic Oscillator and oil prices) are still being resolved to the downside. Earlier today, the bullish gap higher in the oil futures encouraged the bulls to act, yet their upswing attempt has been already erased. While the above support the bears and the short position remains justified, we have decided to adjust the trade parameters to protect a sizable part of earlier gains and cash in on a likely upcoming spike lower.

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 to also benefit from the trading action we describe. Check more of our free articles on our website, including this one (it covers today’s pre-market action and the target of the upcoming short-term move) – just drop by and have a look. 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. On top, you’ll also get 7 days of instant email notifications the moment a new Signal is posted, bringing our Day Trading Signals at your fingertips. Sign up for the free newsletter today!

Thank you.

Nadia Simmons
Forex & Oil Trading Strategist

Sunshine Profits – Tools for Effective Gold & Silver Investments

* * * * *

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.