Light Sweet Crude
CL had a fairly flat week in the end as the market continues to pressure the upside at $100. The market has been fairly resilient over the last few months, and the $105 level is a big one that the market will continue to struggle with by all accounts. The Iranian government has been saber rattling again, and this only helped to keep the upward pressure on as the traders in the pits contemplated the possibility of the Strait of Hormuz being blocked by Iranian Naval vessels.
The charts are showing the possibility of a bullish flag forming, and a break of the $105 level would also signal a massive “W” pattern being completed. On the bearish side, there is a bearish channel that has been in effect for the last 6 weeks or so, and we have yet to break through the top of it as of the end of the year.
This sets up for a fairly simple trade: Buy this contract if we break above the $105 level as it shows that the oil markets are about to take off again, and based upon the potential flag – we could be looking at a price as high as $135 or so. The downside will be somewhat limited, but easy to track because of the well-defined channel. We are bearish at the moment until the $105 level gets broken – we think this market suddenly becomes a long term buy and hold.
Oil Forecast for the Week of January 2, 2011, Technical Analysis
Brent
Brent continues to meander around the $100 mark as the traders have been back and forth about the market over the last 9 months or so. The market looks very range bound and we think the $112.50 and $102.50 levels will remain the outer boundaries of this market going forward. The market looks like it will attempt to rise in the short run, but the $112.50 has been very resistive recently. We think this will continue to be the case. The closer we get to that mark, the more we are willing to sell. We aren’t ready to buy at this point as we are in the middle of the range.
Originally posted here
