Option play: Will grind lower continue in crude?

As far as the fundamentals and the technicals are concerned in the crude oil (NYMEX:CLN14) market right now, how far do we think it will continue to fall? Fundamentally, I believe there are 3 major reasons why crude oil prices will move lower to sideways for the most part over the next 60 days or so.

1. The Al-Qaeda insurgency in Iraq has not made it and does no look like it will make it to the south of Iraq were three quarters of the countries oil is produced.

2. There is still more than 380 million barrels of crude oil supplies here in the United States, which is substantial in my view.

3. Finally, I don't think we will see the big drop in supplies this year after the big July 4 weekend.

For example, the American Petroleum Institute (API) today (July 8) showed a 1.7 million barrel draw down. That is after typically, the biggest driving weekend of the summer. Well, we will see what the Energy Information Agency (EIA) says today at 9:30 am Chicago time. I believe it will be bearish to neutral.

 

 

Source: eSIGNAL

 

Technically, in my opinion we are on the verge of a full blown "SUPER-TREND" down. As always, I have added my favorite technical indicators to the daily crude oil chart. The 9, 20, and 50 day Simple Moving Averages (SMA's), the Bollinger Bands (yellow lines), and finally the Candlesticks formation chart (red and green bars; each represents one day).

 

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