Could crude oil test its yearly lows?
After all, November crude oil saw massive liquidation and fresh selling Wednesday. In turn, traders have been selling against the $93 level considering the demand issues. However, witnessing the trade Wednesday, I think it is just that — “a trade!”
Psychologically, once this market started trading through $90 level and below support of $89.75 a barrel, longs ran for the hills selling to close positions. Yes, crude oil output is at the highest level in 15 years amid serious demand worries, but nothing too drastic has changed in the last three weeks when this market was sitting well above $95 a barrel and testing $100 a barrel other than the fact that it truly failed. A close below $87.50 and $87.10 will cause more liquidation.
So what’s my move?
On a close below this level, I look to jump aboard in anticipation of a further break to what in the end could be a test of the yearly lows at $78.83. This market can consolidate below $90 without making new lows in order to take a breather, but the truth is this chart looks ugly. With that being said although the path of least resistance is lower this market is still subject to geopolitical risk.
(Watch: Rich Ilczyszyn's Best Oil Trade Yet)
Here are some key levels to watch:
Pivot — $88.95, a close above here can put this market into a consolidation mode
Resistance — $89.75**, $91.00*, $93.10**, $94.28 - $94.69**
Support — $87.50 - $87.10***, $84.91, $82.00, $78.83***
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