Crude oil prices sold off for most of last week, but rebounded on short covering ahead of the holiday weekend prompted by a 2-week technical double bottom at 4737-4726. Pressure early in the week brought on by continued concerns that the ongoing recession will keep energy demand weak and on a reduction of forecasted hurricanes for 2009 from 14 down to 12, drove prices to a low at 4737. However, as we closed in on the end of the abbreviated week, a bullish DOE report and strength in equities gave conviction to the 2-week double bottom triggering a $5.00 short squeeze that ended with a settlement at 5224.

Looking at the broader technical picture, the market is in a 3-month uptrend (monthly chart) and a 9-week uptrend (weekly chart) but momentum has paused due to the “Doji” candlestick appearance three week’s ago. Additional daily candlestick patterns have helped to keep a lid on prices yet the settlement above the 5000 level suggests the Bulls are maintaining control at the moment with 6000 as the next major goal in the weeks ahead. It will take a drop below 4700 to put the Bears in control for a short term but solid corrective smack down into the mid to low 40’s.

Breaking down the charts for this week, the 9-week uptrend line (9 W ^ TL) crosses at 4900, setting an early ‘buy dips’ bias against the 5000-4900 range. If pullbacks hold this range, expect to see bull forces prevail with an initial profit objective at key weekly Resistance from 5360 to the 2009 high at 5466. The secondary target is placed at 5600. Producing any settlements above 5466 throughout the week will garner strength for a larger run aiming at the top of the 3-month uptrend channel (3 M ^ TL CHNL) at 6000-6055 and possibly as high as 6200 on strong momentum.

The initial downturn point this week is placed below the 9-week uptrend line (9 W ^ TL) at 4900 and is expected to revisit the 2-week double bottom lows at 4737-4726. A violation of these lows has bearish implications for a significant trend reversal that will likely trigger liquidation sell offs over the course of the week. The initial objective is placed at the bottom of the 3-month uptrend channel (3 M ^ TL CHNL) at 4530. The extended target range below 4530 is placed at 4450-4200, representing a 50% and 62% correction of the 9-week bull trend respectively. Any trade below 4200 shows room to challenge the psychological 4000 level.