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Oil Prices Rally As Speculators Eye "Bullish" Charts

Friday, 8 Feb 2008 | 11:26 AM ET

The energy complex may go into this weekend on a high note. Oil prices have rallied about $3 from yesterday's intraday low. Some traders are telling me it's mostly short-covering, with the bears unable to push prices all the way down to $86.

Today traders' focus isn't so much about supply concerns--Shell declaring it's suspending exports from Nigeria's Bonny export terminal or forecasts for lower output from the North Sea next month--though they are supportive.

Much of the current strength is purely technical. Joe Terranova, head of trading at MBF Clearing Corp, says what was once resistance always becomes huge long-term support and that's what you see around $84.

"We tried breaking through that resistance from September 20 until October 11, when we finally did," Terranova said. "Subsequently we have had 4 troughs, each time a higher low."

Yesterday again the low was $86.24 slightly above this year's intraday low of $86.11. Terranova says "the bottom line is that specs are staying in the game using this amazingly bullish chart formation as the indicator."

Questions? Comments? energysource@cnbc.com