Oil Forecast for the Week of December 26, 2011, Technical Analysis

Light Sweet Crude

The CL contract had a very positive week as traders piled into the market. The formation we are currently seeing is looking like one of two potential reads: either a bullish flag or a downward channel. The burden of proof is on the bulls presently, but a serious break north of current levels would have this market possibly seeing prices as high as $130 in the future as measured by the potential pole for the flag. However, we are willing to sell any weakness at the moment as we would return towards the bottom of the channel.

Brent

Brent markets rose as well over the week, and reentered the previous consolidation range. The market looks like it wants to grind sideways with a slightly bearish tone. The next $10 or so will be full of noise on this chart, so selling weakness is our preferred trade at the moment.