Are We Looking at a Dead Cat Bounce in Crude Oil Price? / Commodities / Crude Oil

Oil bullslook to have arrested the slide as there hasn’t been a down day since Thursday.One could easily expect a more vigorous rebound, however. The nearbyresistances remain and black gold has hardly gone anywhere today so far. Afterthe long weekend, will the bulls muster more strength, or does the technicalpicture favor another trip south in the coming days? The answer isn’t as easyas might be inferred from the Alert’s title...

Let’s takea closer look at the chart below (chart courtesy of http://stockcharts.com).

The dailyperspective shows crude oil having moved a bit higher after Thursday’slandslide. The upswing of several trading sessions invalidated the earlierbreakdown below the lower border of the declining blue trend channel and thedashed green support line (based on late-March lows).

Although this is a positiveevent for the bulls, we should keep in mind that they haven’t reached even the38.2% Fibonacci retracement (based on the last week’s decline). This increasesthe likelihood of seeing another downswing in the coming days. Especially so,when we factor in the weekly picture of the commodity and the similarity to therecent past. Let’s quote our Friday’s Alert:

(…) Crudeoil has created a similar gap in November 2018 – that’s not too far fromyesterday’s gap. Back then, oil bears also created a long red candlestick onvery high volume (it’s marked with a blue vertical line). There was an attemptto repair the damage in the following days but the bulls’ efforts failed aftera few days, and light crude declined again.

Will thehistory repeat itself? It’s quite likely. There’s also one more thing speakingfor the bears today – back then, the Stochastic Oscillator supported thebuyers, now it visibly favors the sellers.

How lowcould the oil price go next? Let’s remember once more our Friday’s Alert:

(…) If thecommodity extends losses from here, we could see a drop even to around $53.50,where the size of the decline corresponds to the height of the channel.

But thefirst target for the sellers will be a bit higher – at around $54.70, where thesize of the downward move equals the height of the rising red wedge (as markedwith yellow rectangles).

This isthe area marked by the 50% Fibonacci retracement, the late-February andearly-March lows. They together create the green zone serving as the nextimportant support for the bulls.

Summing up, theoutlook for oil is bearish. After the Wednesday and Thursday’s sessions thathave shaken the oil market, the bulls have been unable to engineer a fast pricerecovery. Black gold is still trading beneath important short-term resistances,its rebound from the lower border of the declining blue trend channel and thedashed green support line. The weeklyindicators and volume comparison continue to support lower prices and thepicture concurs. The short position continues to be justified.

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Thank you.

Nadia Simmons
Forex & Oil Trading Strategist
Sunshine Profits -Effective Investments through Diligence and Care

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All essays, research andinformation found above represent analyses and opinions of Przemyslaw Radomski,CFA and Sunshine Profits' associates only. As such, it may prove wrong and be asubject to change without notice. Opinions and analyses were based on dataavailable to authors of respective essays at the time of writing. Although theinformation provided above is based on careful research and sources that arebelieved to be accurate, Przemyslaw Radomski, CFA and his associates do notguarantee the accuracy or thoroughness of the data or information reported. Theopinions published above are neither an offer nor a recommendation to purchaseor sell any securities. Mr. Radomski is not a Registered Securities Advisor. Byreading Przemyslaw Radomski's, CFA reports you fully agree that he will not beheld responsible or liable for any decisions you make regarding any informationprovided in these reports. Investing, trading and speculation in any financialmarkets may involve high risk of loss. Przemyslaw Radomski, CFA, SunshineProfits' employees and affiliates as well as members of their families may havea short or long position in any securities, including those mentioned in any ofthe reports or essays, and may make additional purchases and/or sales of thosesecurities without notice.

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