Looking for a test of highs to sell; use the levels.
Crude oil is trading more than a dollar from the high reached early in Friday’s session after traders and investors alike have taken off some of the risk premium bought into the weekend. Our initial major resistance level of 107.33 which has evolved into 107.33-107.68 has held very well. Traders want to use the 106.53 level on a closing basis today; a close below here will likely encourage a consolidation lower into tomorrow’s EIA data. A lack of new headlines out of Iraq will continue to encourage a consolidation lower.
However, only a close below 104.99-105.22 will signal a failure and further move lower. Economic data today will play a great role in showing the strength of the economy and thus demand for oil. Look for oil to hold the 106.53 level upon strong U.S. data. What traders need to be weary of if the rally picks back up and if the market gets out above 110 on fear of the situation in Iraq taking a further turn for the worse and disrupting the oil supply, shorts will have to run to cover and this could push the market another $5 at minimum.
Resistance – 107.33-107.68***, 109.32**, 112.24***
Support – 106.53**, 105.68-105.92**, 104.99-105.22***, 104.50*, 103.65-103.85**, 103.11**