Crude: Still not bullish

After finding support at the Fibonacci Confluence zone around 99.00 in early May, the crude oil market has seen solid strength as price is now trading above 102.00 heading into today’s EIA Petroleum Status report. Near term momentum does appear to favor a bullish argument; however, there is significant technical evidence suggesting a potential counter-momentum opportunity in this market. Yesterday’s rally has pushed price into significant resistance from 102.06 – 102.21 on the chart.

Additionally, a previous ascending trendline, which has already been penetrated, may look to resurface around the same area on the chart, just above 102.00. Broken trendlines often provide structure to the market even after they have been penetrated, and in this particular instance, the trendline happens to intersect a relatively important area of resistance on the chart. As a result, there may be an opportunity for bearish traders to sell the recent strength in crude in anticipation of a rejection from the 102.06 – 102.21 area and hopefully a bearish inventory report at 9:30 am CT today.

If the previously mentioned scenario does play out, traders could use the initial support area from 101.20 – 101.38 as an initial profit objective for shorts. Below here, a move down to 100.50 and perhaps even a test of the 100.00 pivot could be valid downside scenarios. Keep in mind that this is indeed a counter-momentum opportunity and may have a lower probability of success as a direct result of the recent positive price action in crude. In the event that the 102.21 level does not hold resistance, the next significant resistance pivot on the chart does not come into play until around 103.34. Traders should continue to monitor price action around key technical levels and be cognizant of today’s report at 9:30 am CT, which will likely inject additional volatility into the market.


Crude Oil 30-minute Bar Chart (e-Signal)

 

 

 

About the Author
Erik Tatje

Erik Tatje is currently a market strategist at RJO Futures and is the author of The Tatje Report, a daily technical correspondence. He has been an affiliate member of the Market Technicians Association since 2011 and has passed all three levels of the Chartered Market Technician (CMT) program. Erik can be reached at etatje@rjofutures.com or 312.373.5176. Learn more at www.rjofutures.com.

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