Oil rally hits the buffers – hard!

December WTI oil futures - daily chart
December WTI oil futures – daily chart

The short term rally for crude oil, came to a shuddering halt yesterday, as the December WTI futures contract closed at $92.88 per barrel, having shed over $3 per barrel on the day, closing as a wide spread down candle on the daily chart. The sharp sell off was accompanied with high volume, validating the move lower as US dollar strength continues to dominate the commodity markets. The deep resistance level in the $96 per barrel region also came firmly into play yesterday, with oil failing to breach this key level denoted with the blue dotted line. This level of resistance has held firm throughout August adding further downwards pressure to the current bearish picture. The pivot high posted on Monday’s candle is also signalling a deeper move lower, and the next level of possible support is in the $92.80 per barrel. If oil breaks through this price point, then expect to see the commodity move deeper still, initially through $92 per barrel, with the next area of support on the longer term charts in place at $88 per barrel. As always, volume price analysis will signal the way, and to date there has been no evidence of a buying climax for oil in any timeframe – so for the time being, the commodity remains bearish, if and until the big operators move back in to buy.

With the Labor day holiday, the crude oil inventories report is not due until tomorrow, and with the markets expecting a draw once again of -1.02m bbls, this may help to provide some support for the beleaguered commodity. However, unless this number is wildly exceeded, any bounce is likely to be modest given the strength of the move lower yesterday.

By Anna Coulling

About Anna 1055 Articles
Hi – my name is Anna Coulling and I am a full time currency, commodities and equities trader. I have been involved in both trading and investing for over fifteen years and have traded many different financial instruments, from options and futures to stocks and commodities. I write and publish articles ( mostly for free ) for UK and international publications on a wide variety of financial issues, and in particular I enjoy helping others learn how to invest and trade.

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