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TECHNICAL ANALYSIS


Drilling Range For Crude Oil Futures

05/11/10 12:03:29 PM
by Austin Passamonte

Here's a market outlook for the crude oil futures index.

Security:   CL
Position:   N/A

Crude oil has the unique distinction of being a consumable commodity product and a quasicurrency market in rather equal balance. The effects on crude oil pricing are part supply/demand and part US dollar value offsets.

FIGURE 1: CRUDE OIL FUTURES, DAILY
Graphic provided by: TradeStation.
 
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.

FIGURE 2: CRUDE OIL FUTURES, WEEKLY
Graphic provided by: TradeStation.
 
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.

FIGURE 3: CRUDE OIL FUTURES, DAILY
Graphic provided by: TradeStation.
 
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.



Austin Passamonte

Austin is a private trader who trades emini stock index futures intraday. He currently trades various futures markets from home in addition to managing a trader's educational forum

Title: Individual Trader
Company: CoiledMarkets.com
Address: PO Box 633
Naples, NY 14512
Website: coiledmarkets.com/blog
E-mail address: austinp44@yahoo.com

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Date: 05/11/10Rank: 5Comment: 
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