Crude oil’s uncharacteristic seasonal rise took the market up to $52.86 last Thursday before the market sold off into the end of last week and early this week. Since then, crude has been trading around the key psychological and technical $50.00 level.
Given that crude’s fundamentals are not bullish, that its seasonals are bearish, and that the CFTC’s Commitment of Traders report suggests an overwhelming number of speculative longs, we believe that crude oil should continue to go lower; therefore, we prefer to sell rallies in this market.
The first area of resistance for crude is marked by the green trendline on the chart below, where bears need to hold to ensure a series of lower highs on this hourly chart. The yellow and blue line price markers above the trendline indicate this week’s high at $51.24 and last week’s close at $51.64. Both levels are important prices for bears to defend.
To the downside, the grey shaded region reflects a strong support band from $49.60 to $50.05. This price area currently remains support and is vital for bulls to hold. Bears must break through this area to begin any selling pressure momentum. A break of that support band could lead to a retest of this summer's low at the $45.00 in this market over the weeks to come.
Traders today should be aware of the employment report at 8:30 a.m EST and the Baker Hughes Rig Count at 1:00 p.m. EST. In addition, several Fed speakers are on the economic calendar throughout the day.