Oil Bulls Attempt to Repair Yesterday's Damage

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Published : May 15th, 2019
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Category : Opinions and Analysis

We have seen a pretty sharp oil reversal yesterday. The U.S. session sent oil bulls packing. Not giving up, they're attempting a comeback today. Geopolitical news to their rescue: the drone attacks on key Saudi pipelines. Emboldened by this tailwind, do the oil bulls stand a chance of reversing the tide of recent declines?

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

Crude oil has moved higher during yesterday's session, there's no debating that. However, it gave up all its gains and then some, powerfully reversing lower. Its price is still trading below the 50-week moving average.

Then, there are the sell signals by the weekly indicators. Finally, the volume of last week's decline was higher than that of the preceding week. All these factors suggest that another move lower may be just around the corner.

The daily chart provides more clarity. Crude oil moved sharply higher in yesterday's early U.S. trading, but the resistance area created by the mid-April lows stopped the buyers. The price reversed sharply lower.

This looks like another verification of the earlier breakdown below this support-turned-resistance. It suggests deterioration in the coming days, today's modest upswing notwithstanding.

Lower oil values will be however more likely and reliable only if black gold drops below the lower border of the blue consolidation and closes the day beneath it. To do so, the bears have to break below both the 50- and 200-day moving averages and also close the horizontal purple price gap. Until then, short-lived moves in both directions shouldn't surprise us.

Summing up, the outlook for oil remains bearish. Oil has given up all its yesterday's early gains and today's modest upswing doesn't change the picture. The fact is that oil is still trading inside the blue consolidation. The bears look to be holding the upper hand as the red horizontal resistance line (it's based on mid-April lows) has reliably kept yesterday's gains in check. The position of the weekly indicators supports the downside move. The bears' first objective is to break below both the daily moving averages. The short position continues to be justified.

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!

Thank you.

Nadia Simmons
Forex & Oil Trading Strategist

Sunshine Profits - Tools for Effective Gold & Silver Investments

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Przemyslaw Radomski is the founder, owner and the main editor of www.SunshineProfits.com. Being passionately curious about the market’s behavior he uses his statistical and financial background to question the common views and profit on the misconceptions. “Don’t fight the emotionality on the market – take advantage of it!” is one of his favorite mottos. His time is divided mainly to analyzing various markets with emphasis on the precious metals, managing his own portfolio, writing commentaries, essays and developing financial software. Most of the time he’s got left is spent on reading everything he can about the markets, psychology, philosophy and statistics. Mr. Radomski has started investigating the markets for his private use well before starting his professional career. He used to work as an informatics consultant, but this time-consuming profession left him little time for his true passion – the interdisciplinary market analysis. Establishing www.SunshineProfits.com gave him the opportunity to put his thoughts, ideas, and experience into form available to other investors.
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