Light Sweet Crude continued to bounce around in a tight range on Tuesday as traders have to weigh all of the factors going into the Iranian situation. The demand really isn't there, so if fear is to go away, we could see weakness. However, until we get some kind of resolution on possible sanctions against Iran, and the Iranians reacting by closing the Strait of Hormuz, this market will more than likely be a tight one.

We see $105 as a resistance area that simply must be cleared in order to continue higher. A close on the daily chart above that level has us buying the CL contract with a target of $115. ON the downside, we see $95 as very supportive. If that area breaks, there is a high likelihood of seeing the $90 mark in short order. However, in the mean time we feel that scalping is probably going to be the way to go in the short-term.

The market is a sell as we get near the $105 resistance area, and especially if we see weakness in the candles that get printed in that area. If that area gives way, then we wouldn't hesitate to reverse and buy to get to $115, which of course in theory should pay for any losses from the sell position.

Looking at the lower end of the spectrum, buying at $95 is possible, and there is a massive support band all the way down to $90 from that level. One would have to believe that the easier trade is to the upside overall, and that tensions could continue to find a reason to push this market higher. Because of this, we are willing to buy on pullbacks in this market as it really does look fairly buoyant at this point in time.

The daily candle that formed for the Tuesday session was fairly strong, but in a somewhat tight range. The market looks like it wants to rise at this point, but buying here would be chasing the trade in our opinion. Buying on dips will not only save you money, but it should expand the profitability of this trend for you as well.

Oil

Oil Forecast January 18, 2012, Technical Analysis