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Will Crude Oil Extend Gains?

By Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief, Gold & Silver Fund Manager
Sunshine Profits - Tools for Effective Gold & Silver Investments
July 29th, 2017

On Tuesday, crude oil extended gains and hit a fresh July high, but will we see further rally in the coming days?

Crude Oil's Technical Picture

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

Looking at the weekly chart, we see that crude oil extended gains and approached the 50-week moving average.

How did this price action affect the very short-term chart? Let's check.

Quoting our Tuesday's alert :

(...) Earlier today, oil bulls pushed crude oil futures higher, which suggests that the commodity will follow them in the coming hours.

How high could light crude go? In our opinion, the initial upside target will be the last week high of $47.74. If this resistance is broken, we'll see a test of the red resistance zone marked on the daily chart.

On the daily chart, we see that oil bulls pushed crude oil higher as we had expected. Thanks to yesterday's increase light crude not only climb to our upside target (the red resistance zone), but also tested the strength of the 50% Fibonacci retracement based on the entire 2017 downward move. Despite this improvement, this resistance encouraged oil bears to act, which resulted in a pullback and an invalidation of the earlier breakout above the red zone.

What's next for the commodity?

Taking into account yesterday's invalidation of the breakout and the current position of the daily indicators (the CCI increased to its highest level since May, while the sell signal generated by the Stochastic Oscillator remain in place), it seems that the commodity will extend losses in the coming days.

Additionally the space for gains seems limited as the upper border of the purple rising trend channel, the upper border of the blue declining trend channel and the 50-week moving average are not far from yesterday's levels. Therefore, we think that even if light crude increases slightly later in the day, the combination of these resistances will be strong enough to stop oil bulls and trigger reversal and declines in the coming days.

Finishing today's alert, please keep in mind that after yesterday's market's open the American Petroleum Institute showed that crude oil inventories fall sharply by 10.23 million barrels at the end of last week, but we didn't see a significant increase in the price of crude oil earlier today, which suggests that reversal may be just around the corner. Additionally, yesterday's data showed that gasoline supplies rose 1.9 million barrels, which doesn't bode well for further rally - especially if today's government data doesn't confirm such significant drop in crude oil inventories. In this case, oil bears will receive important reason to act and we'll consider opening short positions.

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By Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski, CFA
Founder, Editor-in-chief, Gold & Silver Fund Manager
Sunshine Profits - Tools for Effective Gold & Silver Investments
July 29th, 2017

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.