Pro: Why This Chart Is a Reason to Sell Crude

Last week, crude prices were helped by a drop in supply numbers, which added fuel to a dramatic five-week rally that increased prices by 8%. We will get new supply data today, and it seems to me that the market has baked in numbers that will support prices. The risk thus appears to be to the downside.

The technical picture of crude confirms that the road higher is now littered with obstacles. Most pressingly, we are running into strong resistance at a series of old highs that come in around $95.00 in February crude futures. A trade below $93.00 will be the first signal of a negative corrective move, and suggests an initial objective of $91.50. If $91.50 then gives way, the market should move to near $90.00.

Mexico oil rig
Alfredo Estrella | AFP | Getty Images

The negative sentiment in crude prices could be intensified by the uncertainty surrounding earnings season. Both equity markets and oil markets have already priced in a good deal of positive news, so a weak earnings season could be the wet blanket on the "risk-on" trade.

I might sound bearish, but let me be clear: The longer-term story still remains positive, with good news from both Japan and China providing tailwinds in crude and equities. However, markets have a tendency to get ahead of themselves, and this makes corrections more likely. We'll see what happens -- but that seems to be just what they've done here.

Read on for 10 Things You Need to Know to Trade Futures

Watch "Futures Now" Tuesdays & Thursdays 1p ET exclusively on FuturesNow.CNBC.com !

Like us on Facebook! Facebook.com/CNBCFuturesNow

Follow us on Twitter!@CNBCFuturesNow

Contact Futures Now

  • Showtimes

    Watch Futures Now Tuesdays & Thursdays 1p ET exclusively on cnbc.com!

Sponsor Links

  • CME Group brings buyers and sellers together through its CME Globex electronic trading platform and trading facilities in New York and Chicago.

  • Take your trading to the next level with a platform that lets you trade stocks, options, futures and forex all in one place with no platform or data with no trade minimums. Open an account with TD Ameritrade and get up to $600 cash.