Is Crude Oil On the Way Up Now? / Commodities / Crude Oil

Crude oil soared higher yesterday and also intoday’s pre-market trading, which shows you why it was a good idea to remaincautious yesterday, even despite crude oil’s breakdown below the rising supportline.

 We previously wrote the following:

We saw a tiny breakdown onWednesday, but it was not based on the decisive move lower, but rather based onthe fact that time passed and the next daily candlestick started below theline. While this makes the outlook more bearish than on Tuesday, the breakdownis not confirmed and we think that the outlook is not bearish enough yet to justify opening atrading position at this time.

Unless crude oil moves sharply higher today,the breakdown will be confirmed, which will be bearish. However, since crudeoil just managed to break to a new monthly high, the bearish implications ofthe above-mentioned breakdown will be nullified by the bullish implications ofthe breakout above previous May highs.

The above means that “when in doubt, stay out”phrase should now be applied, but at the same time, we think that a moredecisive signal might present itself shortly. This is due to the proximity tothe 38.2% Fibonacci retracement level based on the previous decline in crudeoil. As this retracement is very close to the April highs at about $29 level,it means that this strong resistance area, which is confirmed by two resistancelevels, might be able to either trigger a reversal or prove that crude oil isparticularly strong right now – if it manages to break above it. 

Summing up, depending on the way crude oil behaves relative toits nearby resistance level provided by the early-April highs and the 38.2%Fibonacci retracement based on the entire 2020 decline, we might get anopportunity to enter long, or short positions very soon, and increase our 2020profits.

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

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