By FXEmpire.com
The Light Sweet Crude market had a bearish week over the last five sessions, and as you can see on the weekly chart – it has been sold off relentlessly. The market managed to fall in the face of several different factors this past week including European fears, lack of demand, and a strengthening US dollar. At the end of the week, the market sits at the $80 level.
The $80 level is a massive support level, and it will be interesting to see what happens next. Certainly, there has been a lot of buying interest at the end of the week, and one would have to think that after the massive fall we should expect a bounce. However, we all know how news driven the markets are these days, so it certainly will take more nerves to go long than sell on the occasional headline.
The $80 area is in fact the “line in the sand” for the bulls as far as we can tell, so it should be a place that allows for a long-term bias based upon the reaction. So far, we have seen a pop back above it, but it must be said that the weekly candle still looks horrible. Because of this, we are looking for a break of the bottom of the weekly candle from which to sell as it would signal a real breakdown and massive continuation of the fall.
However, there is in fact a real chance of a bounce going forward. None the less, we think that there simply isn’t a reason for oil to be too high at this point, and we certainly cannot envision a move back up to the highs at the $110 level. The Iranian situation could get hot again, and this is essentially the only major bull case to be made. Because of that – we are looking to sell rallies as soon as they show weakness on the daily chart as we think sellers will need to build momentum back up after this massive plunge. We are not buying oil at this point – there are simply far too many reasons for the Dollar to gain in the near term.
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Originally posted here
