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Crude Oil Has Been Consolidating Since Making A High In Early May

ByBenedetto DiCostanzo
Published 06/07/2015, 02:58 AM
Updated 07/09/2023, 06:31 AM

Crude Oil has been consolidating since making a high (62.58) in the early part of May. The last 5 weeks have stayed within a $6 range, with the extremes of the range occurring in the 1st week and this week (low 56.51). The weekly candlesticks have also seen small bodied candles with longer shadows on either side of the bodies. What it comes down to is traders can’t figure out whether the supply demand situation requires higher or lower prices. Supplies are large but with the U.S. rig count down will future supply be curtailed? As of now production is hanging in. With OPEC continuing to produce record amounts of crude and the U.S. production being maintained, supply is not dropping. Despite reports from some that demand is expected to pick up because of stimulus from central banks; there hasn’t been any significant increase in demand to soak up supply. China’s economy is not growing at its desired rate, so while they are buying more crude, they are storing it on offshore super tankers as demand has remained steady.

I put up a weekly chart and you can see the pennant forming. A break above would lead to a test of the 38.2% retracement (67.34) from the June 9, 2014 high (107.68) and the low from March 16, 2015 (42.41). A break below could lead to a test of the 61.8% retracement level (50.11) of the low to the recent high. I look for a breakout form this trading range and would like to strangle the market. I look to buy a 1 by 2ratio call spread above the market and a 1 by 2 ratio put spread below the market.

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Crude Oil Chart

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