The $100 barrier is a psychological target. It’s not actual resistance. In fact, it may even become a trigger point for an acceleration to the upside.
U.S. West Texas Intermediate crude oil futures are edging higher late in the session on Friday, but slightly lower than its seven-year high reached earlier in the session. None-the-less, the U.S. benchmark is poised to post its seventh consecutive weekly gain. The upside momentum suggests the market may hit triple-digits well ahead of estimates.
At 21:10 GMT, March WTI crude oil futures are trading $92.16, up $1.89 or +2.09%. The United States Oil Fund ETF (USO) settled at $64.91, up $1.40 or +2.20%.
Worries over supply disruptions from the Ukraine crisis provided support all week, but Friday’s price surge was primarily blamed on a winter storm in Texas that was threatening production in the Permian Basin, the largest U.S. shale play.
The main trend is up according to the daily swing chart. A late session trade through $93.17 will signal a resumption of the uptrend. A trade through $81.90 will change the main trend to down.
The minor trend is also up. A new minor bottom has formed at $86.75. A trade through this level will change the minor trend to down and shift momentum to the downside.
The market is currently straddling a long-term Fibonacci level at $92.38. This is the last major level to overcome before the psychological $100.00 level.
The minor range is $86.75 to $93.17. Its 50% level at $89.96 is the nearest support.
We’re currently in a news driven rally fueled by strong fundamentals and speculative buyers. We know the price action is strong because traders have been buying strength without fear of a pullback.
Strong demand and low supply are the main drivers of the rally. The headlines over Ukraine and the Middle East are the bullish wildcards. Even if there is a setback, we expect traders to re-emerge on the price dip.
The $100 barrier is a psychological target. It’s not actual resistance. In fact, it may even become a trigger point for an acceleration to the upside.
If there is selling pressure at this level, it will come from profit-taking and not new shorting. Reports last fall called for crude to hit $100 in the third or fourth quarter so reaching it over the short-run may make it overvalued which is usually a good reason to take some cash off the table.
James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.