What to Do in Crude Oil Now

If you saw my video on Tuesday, you know I was looking for crude oil to test overhead resistance at 82.  It did that today, and seems to be headed lower, though we won’t know until the tape closes at the end of the day.  Here is a chart …

There’s crude oil, banging its head on 82, the level I pointed out in my Tuesday video.  And you’ll have to admit that oil has enjoyed a good run recently, up nearly 18% from its December lows.  Now, some of that heat will be taken out of the market.

The fundamentals that traders will point to is the disappointing (for some) inventory news this morning.  The EIA reported a 1.3 million  barrel build in crude oil stockpiles when traders were expecting a 1 million barrel draw (and the API reported a 2.27 million barrel drop last night).  Gasoline stocks rose by 3.7 million barrels while a build of 800,000 barrels was expected. And distillates saw a 300,000 barrel draw, much less than the 1.85 million barrel draw-down that was expected.

But these are just short-term noise.  I gave you some good, long-term forces driving oil higher in my Tuesday video. And to that I’ll add the following math …

• Mexico oil exports are down 14% year over year
• Venezuela oil exports are down 9% year over year
• Saudi Arabian oil exports are down 12% year over year.

As I said in my video, use this pullback to add to long positions.  Oil will likely test support at 79, and if we’ve been good boys and girls, we may see a pullback to 77.  That’s where the Fibonacci retracement lines up with the broken downtrend, which should now act as support.

Could oil go lower? Anything’s possible. But we’re playing probabilities here.

Good luck, and good trades

Related Posts

• Crude Oil Chart — $82 or Bust! (12/29/09)
• Crude Oil — Close But No Cigar (03/13/10)
• Crude Oil Chart — Rangebound (02/16/10)
• Take Another Look at Crude Oil (02/22/10)
• New Chart on Oil (12/12/09)