In the middle of last month, I was of the opinion that crude would have trouble with the 84 level and head back down towards 80 on the way towards the $72 level. However, I did not really take into account how strong the buyers were around the $80/$81 level and this rendered the $84 resistance somewhat less strong than it appeared. Sure enough as November arrived and the leaves fell off the trees, the price of crude smoked to the upside and hit $87.50s late last week and overnight. It has since retreated back toward the projection point - which if you do a simple extrapolation between $79.50 and $83, you end up with a target of $86.50 or roughly in that area. The daily chart found support today at $86.So what is my plan going forward? Well momentum turned up just as the chart was approaching resistance a few weeks back. The breakout then became a formality. The fact that that the market blasted through $86 like it was not there, argues that $89 is probably the eventual target before a meaningful correction follows. A failure around the $86 level though does argue for a retracement back to the breakout point around $83 and change. Momentum remains bullish at the moment so I will continue to play the long side with the trade. Breaks below $86 might encourage some short sales from this trader.
Just one more note. Fundamentals for the oil barrel at the moment are lousy. Thus this move is all about the weakness in the dollar and stock market strength. To find real support, the fundamentals for the distillate end of things must improve but for that to happen, we would need some very high industrial demand on the electricity side or a cold streak forcing everyone to jack up their heat. On the gasoline side, mall traffic was huge this past weekend so we could start to see some better alignment with the fundamentals there.
No comments:
Post a Comment