Light Sweet Crude rose during the session on Wednesday as the markets sold off the Dollar for much of the session. However, the oil inventory numbers out of the US showed a build, and this took some of the luster off of the move. The rally faded, and has printed a shooting star at the end of the day.
The oil markets are finally starting to show some signs of calm as the Iranian situation drags on. Cooler heads have prevailed, (at least in the markets) and it looks like most traders understand that the Iranians cannot actually do much or risk humiliation in the Gulf. With this in mind, the spikes in price seem to be fading, and supply and demand seem to be coming back into the picture.
The $100 mark held as resistance like we have suggested, and the shape of the candle does in fact suggest that we are heading lower. The $96 mark is supportive as well, and we feel that the level will cause a bit of a reaction, but it should still only be a minor area, and we think that it will take something rather drastic to have the markets shoot straight up again. Also of note, we have formed a downward channel over the last couple of months, and it looks like the top of the candle from the Wednesday session respected it yet again.
The $94 level should provide support as well, and it is at this level that we expect the real fight to ensue. The ability for the bulls to maintain that level will be vital for the market going forward if we are to continue the bullish momentum from the last six months. However, it does look a bit toppy at this point.
The market should only be sold at this point, and we aren't willing to buy until we get a daily close above the current area, and even until we get above the $105 level. It is at that point that we feel this market will have cleared a lot of the noise out there. On a break below the $98 level, which is also the Wednesday lows, we are willing to sell.
Oil Forecast February 9, 2012, Technical Analysis
Crude Oil Pivot Points (Time Frame: 1 Day)
Name S3 S2 S1 Pivot R1 R2 R3