Crude oil prices rose for a seventh straight week last week posting 3-month highs at 5466 but settled well off of its highs at 5238. The market gyrated for much of the week between 5200 and 5400 as it deciphered between bullish and bearish news. On the bullish side was the Obama administrations plan to rid banks of toxic assets, thereby fueling speculation that the economy will recover and increase demand for oil. On the bearish side was the DOE inventory report of a larger than expected rise in storage of 3.3 million bbl vs. 1.1 million expected. Inventories rose to their highest level since July 1993 reiterating the presence of the global recession. Despite gains for the week, Friday’s session ended in favor of the Bears off of a technical top at 5465 and on the dollar’s strength curbing the appeal for oil.
Technically, the market is in a 7-week uptrend but vulnerable to a corrective pullback early this week after profits were taken against last week’s objective at the Dec 08 high at 5465. Volume tapering off in the past 2-weeks coupled with a ‘Doji’ candlestick pattern off of 5465 sets the stage for early selling pressure on trade below initial weekly resistance at 5225-5300. Maintaining trade beneath this range is expected to fuel probes into the key weekly support range at 5050-4825. A drop below 4825 violates the 7 W ^ TL CHANNEL and could set off liquidation sell offs targeting the 3 M ^ TL CHANNEL at 4530 to the 50% retracement level of the uptrend at 4430.
Since the market is in a solid 7-week uptrend and set to begin a new month on Wednesday with a confirmed ‘Hammer’ reversal candle, price action that holds the 5050-4825 key weekly support range, which is comprised of the prior 2009 high and the bottom of the 7 W ^ TL CHANNEL at 5047 and 4825 respectively, will present buying opportunities for an upside reversal and initial objective at 5225-5300. Trade above 5300 will renew strength to challenge last week’s highs and key weekly Resistance range at 5466-5600 with the potential for extensions to the top of the 7 W ^ TL CHANNEL at 5700. Producing multiple closes above 5465 throughout the week, or a close above there for the week, will set the stage for a run at the psychological 6000 target price level.
