Short positions with a stop-loss order at $65.23 are justified from the risk/reward perspective.
On Friday, crude oil gained 0.49 percent as a weaker greenback supported the price. As a result, light crude bounced off the neck line of a bearish formation. Will we see further improvement in the coming days?
On Friday, the Federal Reserve Bank of New York reported that its Empire State manufacturing index rose less-than-expected (to 3.9, missing forecasts for an increase to 5.00). Additionally, the University of Michigan's preliminary reading of the consumer sentiment index for May slipped to 88.6 from a final April reading of 95.9, missing analysts’ forecasts for a reading of 96.0.
Thanks to these disappointing numbers, the USD Index declined to Thursday’s low, making crude oil more attractive for buyers holding other currencies. As a result, light crude bounced off the neck line of a bearish formation, but will we see higher values of the commodity in the coming week?
On the long-term chart, we see that Friday’s move was too small to be visible (not to mention change anything) from this perspective. As you see crude oil still remains under the key resistance zone (created by the 200-month moving average and the long-term blue line), which means that as long as there is no breakout above this area higher values of the commodity are not likely to be seen and further deterioration is more likely than not.