The Oil Bears Punished the Bulls’ Hesitation. What Now?

Let’s take a closer look at the charts below:

Yesterday, we wrote that:

(…) the bulls didn’t have much success breaking above the yellow resistance zone. The commodity reversed and invalidated two earlier tiny intraday breakouts: above the yellow resistance and above the 61.8% Fibonacci retracement.

The CCI and the Stochastic Oscillator generated their sell signals, encouraging the sellers. The volume picked up, suggesting that another downswing may be just around the corner.

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.

Summing up, after a couple of days of sideways trading, oil plunged yesterday. It happened on strong volume and after black gold had been unable to overcome a strong combination of resistances (the red resistance zone and the 61.8% Fibonacci retracement) earlier this week. The bearish divergences remain in force: both between the CCI and oil prices, and between the Stochastic Oscillator and oil prices. All the above support the bears, and the short position remains justified.

Thank you.

Nadia Simmons
Forex & Oil Trading Strategist

Sunshine Profits – Tools for Effective Gold & Silver Investments

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