Crude oil futures have mounted an extremely impressive rally this fall, in spite of the fact that the historic seasonality is bearish, the fundamental picture isn’t great, and the CFTC’s Commitment of Traders report suggests that there are too many bulls.
Since reaching a multi-year high just above $59.00 last Friday, the February 2018 Crude Oil contract, CLF8, has traded lower this week, with a low yesterday of $56.75 following the EIA Crude Inventories report.
On the one hand, a case could be made for crude oil to go higher; but on the other hand, some indications suggest it will go lower. We will examine the case for both of these viewpoints, using the 30-minute candlestick chart below as our reference point, we will let price tell us where it desires to go.
Currently, the CLF8 is trading at the $57.75 area. The green trendline on the chart shows resistance just above the $58.00 level. It is imperative for bears to keep selling pressure on this market at this level, or bulls will likely push crude up to Wednesday’s $58.30 high and then target last week’s $59.05 high.
If bulls are going to control this market today for the end of month trade, they will need to hold the steep-angled orange trendline at the $57.50 area. Our view is that if this line is tested today, it will break, leading to a move down to the blue trendline just below the $57.00 area.