Crude oil's plunge intensified on Tuesday morning, as the commodity broke dramatically below $37 per barrel to hit a seven-year low. And at this point, technically minded traders appear to be eyeing $32 as the next substantial level of support.
"Expect the downward acceleration to continue in oil, after the key $38 level was broken in trading last night," warned Phillip Streible, senior market strategist with RJO Futures. "Margin clerks are probably out sharpening their pencils as forced liquidation could drag that market down to $32 per barrel, causing U.S. producers to feel the pain."
Since futures are traded on margins, declines in price can beget further declines, as those traders who are long can receive margin calls that may force their positions to be liquidated. This has the potential to add unnatural selling pressure to the market.
Rich Ross, head of technical analysis at Evercore ISI, also has $32 as the next line of support.
The $32 level happens to have a bit of history behind it; it is roughly the lowest that oil has traded over the past decade. In January of 2009, crude found a low of $32.70 before turning around.