After a long period of declining prices we finally saw a significant bounce on crude oil futures over these past few days.
The market has been in such a strong downtrend that it is hard not to be skeptic on this bounce....yet....price action is price action and many times when the majority of analysts out there call for $30 crude oil, it may be time for the contrarian approach, at least in the short-medium run.
Looking at the daily chart below you will see that 51.71 sticks out as major resistance. This is the high from Jan 15th 2015 (1.15.15....) in addition it is the first level of Fibonacci retracement since this major sell off started. In short this is an area of congestion of a few different levels of resistance. If we break and close above the 51.71 to 51.84 area, I believe this will accelerate this short covering that already started, will attract some aggressive buyers and may create a more even environment where both the bulls and the bears have something to say after a few months where the bears were in total control.
While I don't anticipate a full reversal, even if we break and close above these levels, I do think we may see a run towards the $57 level and as i wrote above a more balanced market.
On the flip side, a failure to break above will fuel another push lower...
The next couple of days will be interesting to watch as crude oil is definitely approaching decision point.
If we do break above levels mentioned, I would look to be a premium seller, risky strategy that is not for the faint of heart nor for the beginner trader but may provide an edge with this volatility.
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