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Downward Reversal in Oil Is Knocking on the Door


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Crude oil hasn't closed higher yesterday and the previous series of rallies appears to face stiff headwinds. Is this it, or can the oil bulls pull a rabbit out of their hats? After all, they've reversed Monday's downswing already. Or does the prospect of wide spectrum U.S. - China uncertainties have the upper hand? It's making itself heard across the board and crude oil is no exception. Let's assess the technical picture now.

We'll take a closer look at the chart below (chart courtesy of http://stockcharts.com).

Yesterday's crude oil trading was almost a mirror image of the Monday's session. While the bulls eked out minor gains on Monday, it was the bears who was stronger yesterday. The price closed down below the 50% Fibonacci retracement yet again. This has been the fourth unsuccessful attempt to overcome it in a row.

As we have pointed to in our yesterday Alert's title ("The Shifting Sands in the Oil Arena"), this suggests a bearish reversal of fortunes ahead. Indeed, at the moment of writing these words, black gold changes hands at around $62.20 which is back inside the blue consolidation.

Should the commodity keep moving lower from current levels, we're likely to see at least a test of the lower border of the blue consolidation. Such a move lower is supported by the unconvincingly low volume of the preceding upswing days.

Summing up, the outlook for oil remains bearish. Oil is still trading below the previously-broken red horizontal line and has had trouble overcoming the 50% Fibonacci retracement. Today, it appears to be rolling over and heading south. The weekly indicators still supports the downside move. The short position continues to be justified.

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Thank you.

Nadia Simmons
Forex & Oil Trading Strategist
Sunshine Profits - Tools for Effective Gold & Silver Investments



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About the author


Nadia Simmons 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, and Oil Investment Updates.

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