The Light Sweet Crude contract had a fairly mixed week as the market had various forces pushing and pulling on it. On one hand, there is concern about the global economy slowing down, but at the same time we had a better than expected Non-Farm Payroll numbers out of the United States, so the fact that the contract was fairly unchanged at the end of the week wasn’t a big surprise to us.
The resulting candle is actually a hammer, and placed quite well for our money. The daily chart looks a lot like a bullish flag, and the bullish hammer on the weekly shows real support at the $105 level for this contract. It should be said that the market looks rather supported at the $105, $100, and $95 levels. This shows just how much upwards pressure there is in the price of oil at the moment.
Of course, there are going to be continued pressures to price because of the Iranian situation, and we think this will continue for some time. In other words, we are in a new range going forward, and it is higher. The $110 level looks to be rather resistive, but in the big picture we don’t expect it to hold prices down for long.
We like buying the break of the top of this hammer as it should signal another attempt to smash through the $110 level and more than likely beyond. The $115 level is still were we think this market goes in the long run, and to be honest – we can even see a case for higher prices as well. The $115 level pushed back quite well last time it was approached, and we would expect more of the same. This suggests to us that when it gives, we should see a significant gain at this point in time. We are not interested in selling this market as it is far too bullish, and we see so many of these support areas below the current price. We are buying on a break of the top of this past week’s range, and we will hold on until the $115 is reached, understanding that we could see a fight at $110. We will decide on what to do with our longs at the $115 level, as it could also give us a chance to hang onto the position for much longer.
Oil Forecast for the Week of March 12, 2012, Technical Analysis
Originally posted here
