The market experienced volatile conditions last week as the May contract went off the board and is expected to continue this week as we finish out the month of April. Last week’s action began with heavy liquidation selling ahead of the May expiration sparked by a strong dollar and soft equities. However, as the week progressed, the dollar weakend and stocks rallied while bullish fundamentals supported a rebound in oil that sent prices closing on the highs for the week at 5155. China’s plan to boost its storage capacity along with comments throughout the week from OPEC members supporting further production cuts were the main factors behind the rally. The cartel is set to meet in May to discuss the supply situation, keeping traders and investors on edge in the coming weeks.
Technically, the market is in a volatile and choppy 6-week downtrend (6 W v TL) from the most recent highs at 5466 within the longer term flagging congestion pattern between the 2008 low at 3253 and the 2009 high at 5466. Though the market rebounded strong last week, price action remaining below the 6 W v TL and last week’s downside gap at 5200 and 5215 respectively is expected to remain under pressure in the near term targeting weekly Support at 4800-4700. Producing daily settlements below 4700 will reinforce weakness setting off additional bear drives to the 3-month uptrend line (3 M ^ TL) at 4530 with the potential to revisit last week’s Spot low at 4383.
Any pullbacks this week that successfully preserve the 4800-4700 weekly Support range will generate sideways to upward pressure within the 4700-5200 range and may potentially pave the way for a continuation breakout above 5215. Settlements above the 6 W v TL at 5200-5215 signals bullish control setting a target range at the 2009 Resistance highs at 5360-5466. Any moves above 5466 projects rallies to 5600-5630 in the subsequent days.
