On Friday, the black gold gained 1.15% and climbed to the previously-broken lower borer of the trend channel. Is this a verification of the earlier breakdown or something more?

Crude Oil’s Technical Picture
Let’s take a closer look at the charts and find out (charts courtesy of http://stockcharts.com).

From today’s point of view, we see that crude oil moved little higher on Friday, which resulted in a climb to the previously-broken lower border of the red declining trend channel.

What does it mean for the black gold? Taking into account the sell signals generated by the weekly and daily indicators and the size of volume, which accompanied Friday’s increase (it was tiny compared to what we saw earlier during declines), we think that light crude just verified the earlier breakdown under the red line.

If this is the case, we’ll see a reversal from around $45 and another attempt to move lower in the coming week. How low could crude oil go? In our opinion, the first downside target will be around $43.08 (the 38.2% Fibonacci retracement marked on the weekly chart). In this area are also the September and November 9 lows and the red dashed support line seen on the daily chart (around $43-$43.07).

What’s interesting this pro bearish scenario is also reinforced by the current situation in the oil-to-stocks ratio.

Relationship between Crude Oil and General Stock Market

The first thing that catches the eye on the above chart is a breakdown under the lower border of the blue declining trend channel. Although the ratio declined below this line in the previous month, oil bulls pushed it higher quite quickly. However, this time the ratio closed the previous week below the ble line, which increases the probability of further declines – not only in the ratio, but also in the case of crude oil as positive correlation remains in place.

Summing up, short (profitable) positions continue to be justified from the risk/reward perspective as crude oil is still trading under the lower border of the red declining trend channel, which suggests that another move to the downside should not surprise us.

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

Thank you.

Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski
Founder, Editor-in-chief

Sunshine Profits: Gold & Silver, Forex, Bitcoin, Crude Oil & Stocks
Stay updated: sign up for our free mailing list today

* * * * *

Disclaimer

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’ 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.

Only logged in users are allowed to post comments. Register/ Log in

The Market Oracle is a FREE Financial Markets Forecasting & Analysis web-site.
(c) 2005-2024 MarketOracle.co.uk (Market Oracle Ltd) - Market Oracle Ltd asserts copyright on all articles authored by our editorial team and all comments posted. Any and all information provided within the web-site, is for general information purposes only and Market Oracle Ltd do not warrant the accuracy, timeliness or suitability of any information provided on this site. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We do not give investment advice and our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to enter into a market position either stock, option, futures contract, bonds, commodity or any other financial instrument at any time. We recommend that independent professional advice is obtained before you make any investment or trading decisions. By using this site you agree to this sites Terms of Use. From time to time we promote or endorse certain products / services that we believe are worthy of your time and attention. In return for that endorsement and only in the cases where you purchase directly though us may we be compensated by the producers of those products.