Crude Oil forecast for the week of October 6, 2014, Technical Analysis

Light Sweet Crude

The light sweet crude market went back and forth during the course of the week, testing the $95.00 level as resistance. However, the area was far too resistive for the market, and the price fell drastically. In fact, we sliced through the $89 level without too much in the way of effort, but bounced just above the $88 level. With that, we feel that the market will probably continue to try to break down going forward.

If we can get below the $88 level, we should then head to the $85 level given enough time. With that being the case, we believe that shorter-term traders will continue to sell rallies as they appear, especially considering that the US dollar has been so strong lately. As long as the US dollar continues to rally, it should work against the value of oil in general. If we did break above the $95 level however, we would be buyers at that point from the longer-term perspective.

Brent

The Brent market fell during the course of the week as well, after initially trying to break out to the $98 handle. We fell hard enough to go all the way down to the $92 level, and this means that we should continue to go down to the $90 handle, but a bounce between now and then wouldn’t be a huge surprise considering how much bearish pressure had been put to the market in the last week. However, it appears that the $95 level above will be resistive going forward, and therefore we would be sellers on any rally to that area that shows even the most insignificant amount of resistance as we believe the downtrend is most certainly in effect.

With that being said, we really don’t have a scenario in which we want to start buying the Brent market anytime soon, perhaps a move above $100 would change that opinion, but until then we would simply sell rallies or be on the sidelines in lieu of buying this bearish market.