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Short Term Bulls Slip Up in Crude Oil

30 July 2009

The rebound in Crude Oil (NYMEX) seen in July, off clear technical support, was no surprise. But we questioned the longevity of this, believing that the bears still had something up their sleeve. We therefore had assumed that this bounce was of a corrective/temporary nature, and decided to maintain a bearish stance in the Commodity Trading Guide. So far, we remain happy with this.

After a base formed below the key 50.00 area, the recovery came to a halt just ahead of the 38.2% retracement on this continuation chart.
We soon turned s/term bearish after this point (please refer to our 25th Jun Update).

Clear support from the Apr high and 50% pullback prompted a strong rally, which violated the 67.22 23-Jun low.
We have been assuming that this recovery would not last – currently there has emerged strong resistance from the 61.8% bounce level – we think there is a good chance that the 59.30 13-Jul low will come under pressure in due course.
The projected bull channel base at 57.25 currently, plus falling return line at 56.70, offers the next support – but there is also a lower Fibo projection which looks interesting – this will be shown in the next Commodity Guide.
Theoretical shorts at 66.60 in the Guide will now favour reducing stops to just above the 68.99 27-Jul high, say 69.25, still targeting 60.00 for partial profits.
Now finally a quick look at the Brent Crude chart…

The Brent contract has been stronger – the recent rebound failed just above the 76.4% bounce level.
Although not dramatic (a more decisive blow-off move is ideal) there was technically a Key Reversal Day on 29th Jun.
A break below the area of the 66.58 23-Jun low would be the next bear sign here.

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