By FX Empire.com
The Light Sweet Crude markets had a very strong showing during the past five sessions. The tensions between the West and Iran continue, and now there is open speculation about Israel taking steps against Iran and its nuclear weapons program. The inability of weapons inspectors to look into the Iranian nuclear program only compounds the issues, and the world is waiting to see if military action is about to be taken by one of the sides.
The recent breakout above the $105 level signals another leg up in this market, and it is with this in mind that we see it as a “long only” chart for us to trade. The tensions in the Persian Gulf look very unlikely to settle in the short-term, and as a result this market will be prone to spikes more than falls. In fact, anytime we see a fall in price in this contract, we will look for buying opportunities.
While we normally try to stick to daily charts or higher, this is one of those markets that may not give you the chance to go long off of longer-term charts. Because of this, we admit that the buy signals on a fall could be found on shorter time frame charts such as the hourly. The supportive candles on lower time frames will more than likely be the signals that we have to use, as the market is overwhelmingly in bull mode at the moment, and looks unlikely to slow down for long.
The market will be very sensitive to headline risks going forward, but it should be noted that the negative headlines should continue, and this should continue to push the price of oil higher. Certainly there is much more risk to oil prices rising than lowering. The idea that this situation will end quietly and quickly is probably asking a bit much considering the history of communications between the Iranians and the West. With this in mind, we choose to lean to the upside, and are looking to build a large position to the $115 level, adding on each dip.
Oil Forecast for the Week of February 27, 2012, Technical Analysis
Originally posted here