The Light Sweet Crude markets fell fairly hard on Tuesday as the Saudis announced they were going to increase production. The Iranian situation is still at hand, and as a result there will be a bit of a nervous bid in this market for the foreseeable future.
The recent pattern (bull flag) that has been broken is still telling us this market goes higher, but the road ahead will more than likely be a bumpy one, with headline risks far outweighing any real fundamental questions, and this market will continue to react to each and every headline as far as the situation with Iran continues to be tense.
The recent action in this market shows strong support at the $104 level, and we think that this is a buy on the dips kind of market unless we get below that level on a daily close. The demand situation in the United States isn't as strong as it has been in the past, but India and China are making up for that in spades.
The $110 level above will more than likely offer some kind of resistance, and as a result we are aware that the market could pullback once it hits that level, which in our opinion will more than likely be a buying opportunity. The pole on the flag that recent broke measures all the way up to a $122 print, and because of this we are expecting a much higher market eventually. This will more than likely be aided by Iran fighting verbally with the West in the future, and as a result we will not only be long - but we will add every time there is a hurdle overcome.
We look to add on a daily close above $110, $112, and $115 with the expectation of seeing that aforementioned $122 handle. The selling of this contract isn't a thought until we get well below the $95 level, as we see it as the ultimate floor for the bulls at the moment. Until then, we are looking for buying signals that we can use to go higher.
Oil Forecast March 21, 2012, Technical Analysis
Crude Oil Pivot Points (Time Frame: 1 Day)
Name S3 S2 S1 Pivot R1 R2 R3