Crude oil prices at the energy complex last week swung rather wildly between key technical support and resistance with mixed economic and fundamental factors fueling the end to end action. As trade early in the week reached the $75.00 resistance barrier, a U.S. government report showing the highest federal deficit in more than six years coupled with rising inventories and weak demand sent trade tumbling on profit taking to the key $70.00 support base. From there, the market began its rebound following stocks higher while the dollar fell. An additional boost came from a report stating consumer spending increased for the third straight month, however, it wasn’t enough to produce gains for the week as October crude oil lost $1.15 to close at $72.74.
Technical Outlook-Sept 1, 2009
The market opened this week well below its 3-week uptrend channel (3 W ^ TL CHNL) at $74.50 and below last week’s technical breakdown area at $73.25 to 73.57, setting off another round of profit taking that took out the key $70.30 to 69.75 Support zone. Additionally, a new month begins this week placing trade below the shorter term 3 M ^ TL now at $72.20 while the 8 M ^ TL from this years lows shifts up to $68.20. That being said, weekly Resistance is placed at $72.00 to 73.57 with an alert to sell any additional failures from that range this week. The downside objective is placed at the 8 M ^ TL and the 9 W ^ TL CHNL’s crossing at $68.20 to 68.00. This is the key area that will likely define trading into the month of September. Trade violating $68.00 this week will accelerate bearish momentum targeting the August and June support lows at $65.23 to 64.95 while follow through below 64.95 leaves the market vulnerable to a major washout back to the summer lows from $62.00 down to 58.32.
If the Bulls succesfully defend the 8 M ^ TL at $68.20 to 68.00, upward momentum is likely to resume over the course of the month targeting new 2009 highs within the $76.00 to 80.00 range. On a weekly basis, as mentioned above, resistance is at $72.00 to 73.57. Trade taking out $73.57 this week is expected to challenge the broken 3 M ^ TL and the 2009 highs at $74.50 to 75.27 while bringing the 38% Fibonacci Retracement level of the 2008 bear flush into play at $76.35. Producing settlements above $76.35 to 75.00 on a multi-day basis signals the next key upside breakout with objectives at the top of the 9 W ^ TL CHNL at $78.50 up to 80.00.
