Crude Oil Continues It’s Surge Upward (USO, ERY, ERX, DIG, DUG)

Richard Rittorno: European shares and U.S. markets are climbing higher after China post healthy trade number, putting markets on a positive territory to a broad based recovery. The renewed risk appetite is helping growth sensitive commodities including crude oil.

The turn in sentiment is most likely due in part to profit-taking as traders look forward to fourth quarter corporate earnings releases against a backdrop of improving U.S. economic data.

Traders may want to keep a cautious eye on the euro zone debt crisis battlefield frontlines with German and French leaders suggesting a new framework for fiscal governance within the euro zone could be completed as soon as end of January, one month ahead of schedule.

Turning to the technical front for insight on crude oil prices possible move traders are finding price is remains trapped between support at $101.30 and resistance at November 17 high of $103.35. If price breaks out to the downside it clears the way for a test of the $100 level and then again at $98.

If price action continues to climb and closes above resistance on a daily chart crude oils next level of resistance is around $106.

Looking at the United States Oil Fund (NYSEARCA:USO) an ETF that seeks to reflect the performance, less expenses, of the spot price of West Texas Intermediate (WTI) light, sweet crude oil.

The fund will invest in futures contracts for WTI light, sweet crude oil, other types of crude oil, heating oil, gasoline, natural gas and other petroleum based-fuels that are traded on exchanges.

Traders see the USO is a upward price channel (defined by the black lines on the chart to the right) and what appears to be a bullish head and shoulder formation in the final stages of forming (solid green lines highlight the right shoulder and head while the dotted line highlights the in progress formation).

If the head shoulders pattern is formed it could give enough lift for price to attempt a test of the Fibonacci -1.618 extension level at $50.95.

Written By Richard Rittorno For Emerging Money

Emerging Money provides insightful and timely information about the increasingly important world of Emerging  Market investments. CNBC Emerging Markets Contributor Tim Seymour leads the team of Emerging Money to bring you cutting edge global news and analysis.

 

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