WTI Crude Oil (USO, quote) spot price ticks slightly lower this morning as commodity traders have to wait an additional day for the department of energy’s inventory report. Traders will be watching closely the American Petroleum Institute (API) Weekly Crude Stock report scheduled for today after the close.

Texas_crude_oilAnalysts are looking for a build of 0.7 million barrels on Thursday.

Both WTI and Brent Crude Oil prices have been well supported in the past month and a half as the U.S. economy recovers from a harsh winter slowdown.

Recent fundamental economic indicators continue to support crude oil prices with U.S. Durable Goods Orders, Manufactured Goods and Consumer Conference Index all higher.

Traders will be watching closely to see if newly elected Pro-European candidate Petro Poroshenko can hold up his promise of restoring order in his country as Pro-Russian separatist and Ukrainian military forces battle it out in the eastern region.

Fundamentally, the crisis is closely tied to the price of crude oil with Russia being the second world’s largest crude oil producer/exporter with over 10 million barrels per day production.

Technically, the crude oil daily chart currently has mixed indicators. The current Fibonacci wave is suggesting another pullback to the 618 retracement level with a failure to break above resistance after the recent bounce off the 618.

Price continues to be on the buy side of the trendline, but it’s this trendline that has me concerned the most. If price falls back to the trendline, we will need to watch extremely closely as price will have then put in the right and final shoulder in a head and shoulders pattern.

A break in the neckline would put the price roughly right in between the 618 and 786 retracement levels or $95.65. This level would price at multiple support levels.

Fundamentally, price seems to have baked in the turmoil (assuming things stay the same or improve) and the chart will tell me when to jump back into the commodity. A completion of the head and shoulders with price holding support will trigger me to enter long, and if price action invalidates the head and shoulders pattern, it will trigger me to go long as well. Breaking the hard $92 support level would trigger me to take the sell side of the trade.

CL-May 28 2014

 

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