From the Desk of Ian Culley @IanCulley
Price must hold above key support levels when defining a range or uptrend.
It might sound simple. Yet investors often sideline these crucial levels in favor of the latest headline.
I read the news daily and support journalists fighting the good fight. However, I don’t incorporate what I read in the papers into my market analysis.
Instead, I focus on price and the critical areas seared into the collective memory bank – support and resistance.
Perhaps you can guess my response when a reader recently asked, “What will it take for crude oil to break down?”
Price must undercut support!
Check out the daily crude oil chart:
The principle of polarity unfolds as former resistance turns support at approximately 83.25. That’s the level.
It’s difficult to hold a bearish outlook for crude or energy as long as buyers defend this key area.
Is the crack spread rolling over, indicating a weakening demand for crude distillates and, by extension, crude oil? Yes.
Has the Energy Sector ETF $XLE, gasoline, and heating oil futures failed to resolve higher from their year-to-date ranges? Yes.
The energy space has plenty of work to do, including crude oil.
But crude deserves a chance to dance after marching higher for three straight months!
Let’s give it a little room…
The new range for crude: $83 - $94.
The world has certainly changed since last week – no question. But as always, change is the only constant.
I haven’t witnessed any significant shifts in overarching market themes – such as the US dollar and interest rates – to the extent of wavering my outlook for crude or energy.
My bias will no doubt turn at some point. And I will embrace those revisions when the data supports it.
Until then, crude oil deserves the benefit of the doubt.
Stay tuned!
COT Heatmap Highlights
- Commercial hedgers hit another record-long position in palladium.
- Commercials are within eight percent of their most significant long exposure to the Swiss franc in three years.
- And commercials hold three-year extreme net-long positions for Minneapolis wheat and KC wheat for the second week.
Click here to download the All Star Charts COT Heatmap.
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