The Light Sweet Crude markets rose again during the Wednesday session as the tensions between Israel and Iran start to heat up even more. The terrorist attacks that the Iran are suspected of being behind continue to have traders worrying about the possibility of a war or at the very least military action being taken in the Persian Gulf.
The Strait of Hormuz allows roughly 20% of the world's oil to reach the markets, and any disruption of that shipping lane will boost the markets, albeit temporarily as the US Navy would certainly be involved at that point. The Iranians aren't necessarily looking to take on the USN, but the fact that they aren't necessarily backing down either will continue to make most traders concerned.
The recent action has seen the market break above the $100 level as well as a downtrend line that had been driving prices lower. It appears that the heightened hostilities are going to continue to propel this market. However, the demand side of the equation is a bit light, so one would have to think that the Iranian situation is the main force behind the bulls at the moment.
The $104 area has been a lid in this market, and we believe that it will continue to do so until at least $105. The $95 level below has been support, and although the recent action has been quite bullish, it appears that we are still in the middle of a consolidation rectangle at this point. This would fly in the face of the overly bullish, but there is always the potential for a breakout. It appears that the breakout would be headline based at this point.
The $105 level needs to be overcome in order for the uptrend to continue going along. The daily close above that level has us long in this market. The selling of this market cannot be down until we break below the $95 level on a daily close. However, for those of you that are more inclined to trade short-term, these two levels could be considered your boundaries.
Oil Forecast February 16, 2012, Technical Analysis
Crude Oil Pivot Points (Time Frame: 1 Day)
Name S3 S2 S1 Pivot R1 R2 R3