Crude Oil Update – Traders Tentative at Start of Holiday Season

March West Texas Intermediate Crude Oil is trading higher shortly before the regular session opening. Volume is well-below average and traders seem to be a little tentative about putting on meaningful positions ahead of the Christmas and New Year holidays.

The overnight price action fell inside Monday’s range. This tends to indicate investor indecision and impending volatility. In the absence of a major news event, traders have to prepare for a sideways grind today, but stay on their toes in case there is a volatility spike.

According to some, investors are focused on unwinding positions without creating volatility and without expecting to take up new ones until the start of 2017. This suggests there may even be tax selling taking place.

The fundamental event underpinning the market earlier today was the news that Saudi Arabian crude oil exports fell by 176,000 barrels per day in October. However, the importance of this news dissipated when it was revealed that the Saudi’s increased exports of refined fuel products.

Technical Analysis

The main trend is up according to the daily swing chart. A trade through $52.10 will turn the main trend to down. A move through the $51.80 main bottom will reaffirm the downtrend. This is the last main bottom before the November 29 main bottom at $46.62. A trade through $56.24 will signal resumption of the uptrend.

The short-term range is $56.24 to $52.10. Its retracement zone is $54.17 to $54.66. This zone stopped the rally on Monday when the market hit its high at $54.47.

This zone is essentially controlling the short-term direction of the market.

The main range is $46.62 to $56.24. If there is a change in trend to down then look for the selling to extend into the main retracement zone at $51.43 to $50.29.

Forecast

Based on the current price at $54.18, the direction of March WTI Crude Oil today will be determined by trader reaction to the short-term 50% level at $54.17 today.

A sustained move over $54.17 will signal the presence of buyers with the next target a price cluster at $54.66 to $54.74. Look for a technical bounce on the first test of this area, but be prepared for a possible acceleration into the next angle at 55.49.

A sustained move under $54.17 will indicate the presence of sellers. The first downside target is an uptrending angle at $53.60, followed by $52.85. This is the last potential Gann angle support before the $52.10 main bottom.

Watch the price action and read the order flow at $54.18 today. Trader reaction to this level will set the tone for the day. Barring any major event today, the market may just straddle this number most of the session.

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