Crude Oil Breaks Down Trendline
The downtrend is broken. It's that simple. Sometimes traders get caught up in too many oscillators and all sorts of moving averages ranging from 20 to 200 days. There is nothing wrong with keeping it simple. You would be surprised how simplicity can bring out the best risk/reward ratios. Today we'll include all the levels so we can see what's next:
I know there is a lot going on in this chart. Too many colors and lines for my taste, but upcoming resistance levels need to be pointed out. First of all, support at the June lows that turned into September resistance has now been broken to the upside. This occurred at the same time that WTIC Light Crude Oil broke out of its down trendline as well as it's 38.2% Fibonacci retracement from the Spring highs.
What are the next levels I'm watching?
Well with Oil trading near $94 this morning, the next key resistance level is approaching quickly as the 50% retracement and 200 day moving average are sitting right around $95. I would not be shocked to see a little consolidation here. Think about it, Oil is up over $10 since Gaddafi's death last week. That's a quick 12% move.
The next key level is $100 where we saw the July highs as well as the 61.8% Fibonacci Retracement. After that, I don't think that a test of the April highs is too much to ask.
But first thing's first. Just because a downtrend is broken (and this is the key here), doesn't mean that a new uptrend has begun. We can just as easily see a sideways range for a little while. This is especially true after such a violent move off the "Gaddafi Bottom". I won't be trading the futures, but I've been looking for nice trade setups in the Drillers and Oil Services companies.
$XOM took out its 200 day moving average yesterday after breaking out of that huge base earlier this month. $CVX, meanwhile, is on its way to testing 52-week highs.
Look at the out-performance of the Energy SPDR Fund relative to the S&P500 since the lows this month:
