By FXEmpire.com
The Light Sweet Crude markets fell on Wednesday as the US reported a build of crude. The larger than expected gain in oil inventories shows that perhaps the demand for oil is waning at these highs levels, and with refinery capacity dropping this summer in the US, there is a real chance this could continue as gasoline prices continue to rise.
One of the biggest catalysts for bullish price action in the oil markets lately has been the tension between Iran and the West over the Islamic republic’s nuclear program. With the recent meeting and subsequent agreement to meet again and keep the channels of communication open, it appears that any real dangers of military intervention may have subsided for the moment. This is turn has lead to a softer tone in general in the oil pits.
The recent price action has been trapped in a bit of a downward channel lately, and it appears that we are in for a “downward grind” as a result. In fact, it is the channel that is by far the clearest pattern we see on the charts at the moment. There are a few levels at the moment that could also be used as guides also, but it is apparent to us that this market is now in short-term trading mode. Simply put, it is going to be hard to hold onto any kind of position for any real length of time.
This isn’t to say the oil markets can’t be traded – far from it. On the chart you will see that the downtrend channel’s top line is just above. If we get above that line on a daily close, we are willing to buy the oil contract at that point, and on pullbacks. However, you must keep in mind that we are talking short-term trades only, and the action afterwards will more than likely be very choppy.
If the price is continued within the channel, we believe that the market should continue to grind lower within the channel itself. None the less, the $100 mark is vital as a psychological round number, so expect some kind of reaction to it. Also, the $95 level is very important as well, and it is below there that we would be willing to hold onto a short. In the mean time though, $1 moves are probably what we are stuck with.
Oil Forecast April 19, 2012, Technical Analysis
Originally posted here
