Oil Bears – Stay The Course

What a day! The beginning of the new quarter, the new month and the new week was undoubtedly the triumph of oil bears. Thanks to their attack, crude oil lost almost 3% in one day, which was the biggest decline since weeks. Conversely, our subscribers were on the winning side as based on the March 27th closing prices, we made our short position in crude oil bigger than ever. What impact did this drop have on the short-term outlook? Where are the nearest supports? For these and other questions you will find answers in today’s alert.

Technical Analysis of Crude Oil

Let’s take a look at the charts (charts courtesy of http://stockcharts.com).

Quoting our Thursday’s alert:

(…) black gold slipped under $65 and the CCI joined the Stochastic Oscillator by generating a sell signal. Additionally, (…) recent declines materialized on increasing volume, which suggests that currency bears didn’t say the last word and further deterioration is still ahead of us.

Looking at the daily chart, we see that the situation developed in line with the above scenario and we didn’t have to wait long to see oil bears’ determined attack during yesterday’s session.

Thanks to Monday’s price action, light crude moved sharply lower, breaking below the last week’s lows and slipped to the 50-day moving average. Although we can see some rebound from here, the sell signals generated by the indicators remain in the cards, supporting oil bears and lower prices – just like the volume, which increased during yesterday’s decline.

How low could light crude go in the coming days?

In our opinion, if light crude drops under the blue moving average, we’ll see (at least) a test of the support area created by the March lows and the barrier of $60. However, when we take into account the zigzag pattern seen on the above chart, the next downside target for oil bears will be the green support zone based on the February lows and the lower border of the medium-term blue rising trend channel around $58.20 (if you want to know more about the above-mentioned big zigzag and Elliott wave theory, we encourage you to read our Oil Trading Alert posted on March 27, 2018).