At The Close by Austin Passamonte
Here’s a market outlook for the crude oil futures index.
Crude oil has the unique distinction of being a consumable commodity product and a quasicurrency market in close to equal balance. The effects on crude oil pricing are part supply/demand and part US dollar value offsets.
That being said, crude oil futures have generally rolled through a sideways range from roughly $74 to $86 per barrel since October 2009 with brief blips outside either extreme (Figure 1). The recent power dive that sent crude prices $13 bbl lower inside of five trading sessions spanned the entire range. We can see where the 74+ mark served as low zone supports in December 2009 and February 2010 before popping to subsequent highs each time. We’ll see how this trip resolves itself, accordingly or otherwise.
Dialing out to the weekly chart view (Figure 2), the same sideways channel shows clear persistence dating back more than a year. Meanwhile, vertical trendlines of support can be seen from bottom lows to higher-swing lows along the way. Both levels were broken on a weekly close basis and now appear to be overhead resistance until proven otherwise.
Back inside the daily chart for CL (Figure 3), we see a bearish head & shoulders formation with crown to neckline roughly $7 in width from 89 to 82 levels. That projects $7 down from crown to low objective or about the $75 mark extended. Bottom of the channel dating back for a year is the bottom of the H&S pattern projection. There is a sticky magnet near the $75 zone. If CL continues to trend lower from here, look for that clustered magnet zone of prior support to then become equally strong resistance.