Why This Week Will Be a Bad One for Oil

Stephen Strathdee | E+ | Getty Images

Energy bulls appear to be confident. According to the weekly Commitment of Traders report, big money and producers have raised their long bets on oil for the seventh week, to a nine-month high.

Nonetheless, crude oil continues to run into the major resistance wall at $98.12, with a $98.15 high on Friday.

Meanwhile, the U.S. dollar index pressed to new swing lows, testing the zone under 79. This will create support for crude oil and other commodities.

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With oil's failure to hold $98, we have seen profit-taking put this market a little more than a dollar lower, below $97. A close below $96.51, Friday's low, will likely create more selling.

Look to the dollar index to trade above 79.50, and for previous support to put additional pressure on crude today. If we close below $94.83 to $94.95, it will likely signal a $2.50 move lower.

That being said, while we can see we can expect to see profit-taking continue this week, the broader trend would remain bullish all the way down to the 200-day moving average at roughly $92.

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