The Light Sweet Crude Market fell on Wednesday as the markets bought into the US dollar on the whole. The pair still looks very bullish to us, and we think that the flag that is being formed is certainly a good sign for pricing and the bulls on the whole. However, we haven't managed to break out of the flag yet, so we think that holding at the moment is the way to go.
With the recent flag measuring $16, we think that a bullish move will eventually see us heading to the $123 mark, but again - we need to see the breakout. The selling of the Light Sweet Crude market isn't going to be easy, and certainly would be the harder of the two positions to take. Because of this, we certainly will not sell at this point.
The oil situation around the world continues to be a situation in flux, but the one common variable is Iran. Until the situation in Iran settles down, we think that there will be a bit of a bid in this market at all times, even when it falls. The recent action certainly suggests that we are trying to build up bullish momentum as the bulls have been taking a bit of a breather. However, the trend is pretty clear, and it is only a matter of time before more people want in on the upside in this contract. You simply have to feel that we are only one headline away from seeing this market shoot straight up again.
The breaking of the top of the flag has us buying, and knowing that the $110 level will act as resistance. This area should only be minor resistance, and our next major fight will be at $115 or so. The breaking of that leads us to $120 and then $122 which is our total target. Selling this contract is almost impossible to do, even if the flag breaks down, as there are simply far too many headline risks out there to risk the trading capital. We could also buy on signs of support at the bottom of the flag as well, based on shorter term charts as well.
Oil Forecast March 15, 2012, Technical Analysis
Crude Oil Pivot Points (Time Frame: 1 Day)
Name S3 S2 S1 Pivot R1 R2 R3