Oil's Technical Bull Case Strong, Despite Weakness at $48.
Today's price action post NYMEX close felt very weird. It seemed a rare occurrence to reverse intraday, sell off into the NYMEX close and continue to sell off through the API report, which was largely in line with expectations. I looked back at the past 20 NYMEX closes and couldn't spot a corollary. However, I also couldn't find enough similarities between other NYMEX closes to call Tuesday's close an anomaly. With that said, I'll remain cautious, but I really need to discount the "feeling."
After taking a closer look at the hourly chart from the 10/27 lows, the recent price action screams bullish. We have a massive bounce off of my prior bear target of 42.75, a powerful acceleration through both the $44 and $45 price levels, which have acted as VERY strong support/resistance and a bullish breakout of a bull channel that coincided with resistance at the previous high, which held three times prior. While oil struggled to hold above 48 at the end of the day, I am targeting a test of $49 tomorrow. If we continue to see weak price action overnight, look for support at the top of the prior bull channel.
Unrelated to the oil trade, it's important to keep in mind that oil above $45ish will start to become an inflationary pressure due to CPI base effects. A sustained run in the $50 should be strongly bullish for DXY, as the market will begins to price in accelerating inflation.
After taking a closer look at the hourly chart from the 10/27 lows, the recent price action screams bullish. We have a massive bounce off of my prior bear target of 42.75, a powerful acceleration through both the $44 and $45 price levels, which have acted as VERY strong support/resistance and a bullish breakout of a bull channel that coincided with resistance at the previous high, which held three times prior. While oil struggled to hold above 48 at the end of the day, I am targeting a test of $49 tomorrow. If we continue to see weak price action overnight, look for support at the top of the prior bull channel.
Unrelated to the oil trade, it's important to keep in mind that oil above $45ish will start to become an inflationary pressure due to CPI base effects. A sustained run in the $50 should be strongly bullish for DXY, as the market will begins to price in accelerating inflation.
Comment:
Well, I guess I should have paid more attention to that "cautious feeling" I had based on yesterday's price action into and following the NYMEX close. It does look like support at the bottom of the bull channel will hold. That said, the lionshare of value in my calls has evaporated, and I don't have strong enough conviction on the short-side for a trade. I'm going to stick it out in these Dec 50 calls until I have more conviction in direction.
