What Will It Take for Crude to Break Down?


From the Desk of Ian Culley @IanCulley

Price must hold above key support levels when defining a range or uptrend.

It might sound simple. Yet investors often sideline these crucial levels in favor of the latest headline.

I read the news daily and support journalists fighting the good fight. However, I don’t incorporate what I read in the papers into my market analysis. 

Instead, I focus on price and the critical areas seared into the collective memory bank – support and resistance.

Perhaps you can guess my response when a reader recently asked, “What will it take for crude oil to break down?”

Price must undercut support!

Check out the daily crude oil chart:

The principle of polarity unfolds as former resistance turns support at approximately 83.25. That’s the level.

It’s difficult to hold a bearish outlook for crude or energy as long as buyers defend this key area.

Is the crack spread rolling over, indicating a weakening demand for crude distillates and, by extension, crude oil? Yes.

Has the Energy Sector ETF $XLE, gasoline, and heating oil futures failed to resolve higher from their year-to-date ranges? Yes.

The energy space has plenty of work to do, including crude oil. 

But crude deserves a chance to dance after marching higher for three straight months!

Let’s give it a little room…

The new range for crude: $83 – $94. 

The world has certainly changed since last week – no question. But as always, change is the only constant.

I haven’t witnessed any significant shifts in overarching market themes – such as the US dollar and interest rates – to the extent of wavering my outlook for crude or energy

My bias will no doubt turn at some point. And I will embrace those revisions when the data supports it.

Until then, crude oil deserves the benefit of the doubt. 

Stay tuned!


COT Heatmap Highlights

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