Oil Trade: Charting Trend Levels To Watch In Crude Oil (USO, UCO, OIH, ERX, ERY)

Corey Rosenbloom: Stocks and Crude Oil performed well in October, breaking critical weekly (and of course daily) resistance levels to shift the dynamic to the buyers.

Let’s start with the weekly chart of Crude Oil and focus on the key price levels to watch going forward:

In the bigger picture, Oil – like stocks – benefited from the inflation generated by the two prior rounds of Quantitative Easing (QE1 and QE2).  One would logically assume a third round of Quantitative Easing – should it begin – would also be supportive for oil prices.

Back to the charts, oil broke through a confluence EMA barrier at the $90 level in October, bringing us firmly above the $90 confluence.

Beyond the EMA confluence, oil broke through a falling overhead trendline which shifted the trend structure back to the bullish case.

Without getting too detailed, oil is in “open air” bullish territory so long as price can remain above $90 which has even more support as we can see on the daily chart:

I’ve annotated the chart more then normal so let’s take it one step at a time.

Starting with the downward Fibonacci Retracement grid, price broke above the 38.2% level at – surprise – $91 in October and now challenges the 50% overhead retracement at $95.50.

Further bullish strength above $95.50 would be expected to carry price to the upper 61.8% level which forms a price confluence from a prior swing high in July.  $100 is thus your simple upside target.

Otherwise, the flat 200 day Simple Moving Average resides at $95.00, and $95 has been a “price polarity” level (you can see price forming both support and resistance there).

I mentioned the ‘floor of support’ at $90 which is enhanced by the rising 20 and 50 day Exponential Moving Averages clustering there.

Ok – main idea:

Further strength above the $95/$95.50 confluence could result in a movement up to the $100 level (‘open air’ on both the daily and weekly chart), while a quick turn-around (retracement) here would be expected to challenge the support again near the $90 confluence.

This is somewhat similar to the structural ‘range’ resistance levels in the S&P 500 at the moment.

Going beyond the immediate range between $90 and $95:

A breakdown under $90 would be a very bearish sign just as a firm breakthrough above $100 would be a bullish trigger.

Watch these objective (non-biased) levels in conjunction with new/real-time developments along the way.

Related: United States Oil ETF (NYSEARCA: USO), ProShares Ultra DJ-UBS Crude (NYSEARCA: UCO), Oil Services HOLDRs (NYSEARCA: OIH), Direxion Daily Energy Bull 3X Shares (NYSEARCA: ERX), Direxion Daily Energy Bear 3X Shares (NYSEARCA: ERY).

Written By Corey Rosenbloom, CMT From Afraid To Trade

My name is Corey Rosenbloom, CMT (Chartered Market Technician) trader, educator, analyst, and I am excited to share with you my experiences studying and trading the markets and to hear from you regarding your experiences, challenges, and frustrations, and successes. My goal is to create a community dedicated to reaching out to those who have been burned by the market or are anxious about risking their money to make money in the stock, options, or futures markets. Together, we can share strategies and learn how to overcome crippling fears that keep us from achieving our highest potential.

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