Thursday's Market Minute: Crude Oil In Turmoil

Crude Oil futures have been one of the most dramatic stories in the market in recent months. The /CL contract rose a staggering +41% from the lows on Jun. 28 to the yearly highs of 95.03 on Sep. 28, traveling within an upward channel-type shape. These highs near 95 stalled out at an important point, which was near old double-top resistance from October and November last year and subsequently resulted in a sharp decline of about -11%.

The situation got even more complicated for this market this week with news of the conflict between Israel and Hamas, which spurred a one-day +4% gap up for oil futures after trading opened on Sunday. However, the move up stalled at the confluence of the 21-day Exponential Moving Average and the lower boundary of the channel near 87.20. This sent price lower and it has now filled the gap that formed when trading opened for this week.

Technical indicators are suggesting a potential trend shift, as the 21-EMA also changed its trajectory from upward to downward, while the longer-term 63-EMA is looking much more sideways than in recent months. These developments suggest potential reversal, and momentum also has shifted according to the Relative Strength Index (RSI) indicator. After surging into the overbought area several times in recent months, momentum has reversed and is now below the 50 midline that separates bullish and bearish movement. 

Price action doesn’t offer many clear points of support and resistance in the recent picture, so commonly followed moving averages could be important to watch in coming days. The /CL contract fell below its 63-EMA yesterday, but is rebounding and once again moving above this point today, which currently is near about 83.93 and will be a key point to watch in today’s trading.

Watch the level of the recent gap just below 83 for support, with the 252-EMA below near 80.88. To the upside, the 21-EMA offers potential resistance near 86.70.

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