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How to Play the Range in Crude

Heat rises from stacks at the Chevron refinery in Richmond, California.
Getty Images
Heat rises from stacks at the Chevron refinery in Richmond, California.

Crude oil's trading range provides a great opportunity.

Crude traded surprisingly well late in the day yesterday, after clearing stops below Wednesday's $90 low.

(Read More: Chavez's Death Not Bullish for Oil: Gartman)

Crude continued to the upside even as the dollar continued higher — likely on speculation of more asset purchases by the Bank of Japan. This did not end of happening, and the non-event actually pulled the dollar back slightly off of the highs, allowed crude to hold against its swing highs and current action at $90.75.

In the early hours of trading, crude failed against $91, and cleared stops below $90 after inventory reports. However, it in fact held this week's $89.33 low. This turnaround should lead to a test of major resistance at the $92 level, which now holds a large amount of volume to accompany the 100-day and 200-day moving averages.

So how should you look to trade crude?

The bottom line is to play the range: Buy against $89.33 with a tight stop, says Ilczyszyn.

But if the trade stops working, get out! Make sure to stay reality-based.

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