Can the Crude Oil Bulls Extend the Sputtering Rally? / Commodities / Crude Oil

The series of higher oil prices appears to be over as today, we might seethe bulls’ power tested. Where can the bears aim realistically and what is mostlikely to happen next? These are certainly valid questions as the oil price hasreached an important resistance and appears hesitating today. Will somegeopolitical news come to the rescue? High time to dive in...

Let’s take a closer look at the charts below (charts courtesy of http://stockcharts.com and www.stooq.com ).

Yesterdayc,rude oil went on to test not only the late-May peak, but also the decliningblue resistance line. Nevertheless, there was no daily closeabove the blue line. Instead, the bulls gave up half of their gains, and oilclosed well below this resistance.

We havealready seen a similar price action on May 20 and also the following day. Backthen, such moves preceded a sizable downswing, which increases the likelihoodof at least a brief reversal from current levels.

Thebearish outlook is also reinforced by the current position of the daily indicators and bearish divergence between the crude oil price and the StochasticOscillator.

Additionally,yesterday’s upswing materialized on smaller volume than what we saw a dayearlier during the small pullback. It raises some doubts about the bulls’strength.

Pleasenote that the recent upward move took crude oil futures (as seen on the firstchart) to the orange resistance area created by the early- and mid-May lows(marked with yellow on the second chart). This area is also reinforced by the61.8% Fibonacci retracement.

What doesit mean going forward? Even if the bulls manage to push the oil price higher,the space for gains looks limited.

On theother hand, crude oil futures have recently opened with gaps (marked withgreen). These call for the bears close them first before any sizable move tothe downside.

Summingup, the bulls have reached an important resistance anddespite the ongoing and increasing bearish divergence in the CCI, they haveretained a certain degree of control. While the oil market is set for a loweropen today, one more upswing remains probable before any correction of recentsizable gains gets a chance to set in. As for now however, there’s noopportunity worth acting upon in the oil arena.

The full analysisalso covers the evaluation of our yesterday oil moves’ expectations and themost likely scenario for the immediate term price developments. You are welcometo check more of our free articles on our website, including this one.  If you enjoyed the above analysis and wouldlike to receive daily premium follow-ups, we encourage you to sign up for ourOil Trading Alerts also benefit from the trading action we describe. Weencourage you to sign up for our daily newsletter, too - it's free and if youdon'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 & SilverTrading Alerts. Sign up for the free newsletter today!

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

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