Forget the fundamentals—here’s how to trade oil now
Do the fundamentals matter for crude oil?
When you look at the crude oil markets Monday and compare them with the picture from just a few weeks ago, you will realize that fundamentals have taken a back seat to technicals. Sure, there has been a slight uptick in demand, geopolitical tensions have risen and the dollar has come off of its recent highs.
But does this justify a $10 move to the upside? I think not. The market is very well supplied, and while demand is stronger, it is still nowhere near where it was just a few years ago.
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So with that, let's take a look at the technical picture.
Once crude oil broke through the $98 level, it was off to the races—and that was a technical move. Throw in the fact that crude is trading somewhat as an investment tool, and voila!, $10 higher.
With all this being said, I do think that we are now a little overdone to the upside. There is good resistance between $106.50 and $107.50, and the first support comes in at $104.60 to $104.00. Under that, you are looking at support at $103.00 to $102.00. If oil breaks below there, we will see $98 again.
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I am going to trade the range for now, which means selling at $107 and looking to buy at $104. The oil range trade worked when we were $10 lower, and I think we are dealing with a similar situation at higher price levels.
I am a true believer in playing a range until that range no longer works—no matter what the fundamentals may say.