Crude Oil Approaches Very Important Support

Crude Oil has been one of the hardest assets to trade over the last several years. While US Equities trend higher in what has been one of the most beautiful uptrends in the World, Crude Oil can't seem to get out of its own way. Sideways markets like this are tough to manage. They are well defined by whipsaws in both directions which frustrates both the bulls and the bears. But today I want to take a look at a very important support level that we've just hit.

This is a daily bar chart of Crude Oil futures where we can point to three separate reasons why this particular price point is so important. First of all, we have sold off all summer during the, "summer driving season" (whatever that means), down to an important uptrend line from mid-2010. This is just the 3rd test of this trendline, which makes it less vulnerable to break than if it was the 4th or even 5th test of support:

Next we can see that there is also horizontal support from the lows over the last 18 months. This level is shaded in gray. And finally, this price represents exactly the 61.8% Fibonacci retracement from the epic rally off the lows in the Summer of 2012 (see here).

This is my line in the sand. Above this level and we can own this thing as heavy as we want. I think there is a pretty good chance we rip back towards the July highs. But as nice as that rally might be, the risk is very well defined. That I think is the most important thing to recognize here.

This is not something we want to own below this level. If this support fails, then we want nothing to do with it. But when support levels cluster like this (Trend line support, horizontal support and Fibonacci support), it's hard to ignore the risk/reward opportunity.

I can't believe I'm saying this....it's been a couple of years since I have....but I like Crude Oil here.

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Tags: $USO $CL_F