×

Cramer's charts predict a murky future for crude, despite Trump's pro-energy stance

President Trump attempted to fast track the Keystone and Dakota Access pipelines on Tuesday, proving to Jim Cramer that this will be the most pro-petroleum administration in American history.

However, that doesn't mean the price of oil is about to skyrocket.

"While the oil producers will definitely benefit from deregulation and the approval of new pipelines, the actual outlook for the price of oil is more murky," the "Mad Money" host said.

To gain further insight, Cramer turned to Carley Garner, a technician and commodities expert. She is also the founder of DeCarley Trading and is a colleague of Cramer's at RealMoney.com.







The first element Garner took into account is the seasonality of oil. Typically oil strengthens from the later part of the first quarter into the end of the third quarter. However, given that oil prices are already elevated, Garner doesn't trust seasonal patterns right now.

For seasonal patterns to be relevant, the price of crude would need to be hit hard in the next few weeks.

The next factors she considered were: Was who owns oil right now, and is it in weak or strong hands. According to the Commodity Futures Trading commission's Commitment of Traders Report, oil future speculators currently have the largest net-long position since the price of crude started crashing in June, 2014.

The last time big traders and investors were this bullish on crude, the price of oil crashed 60 percent over the following six months. With so many bulls right now, Garner thinks it could be difficult for crude to have much more upside.

The weekly chart of West Texas Crude was also filled with mixed signals. Garner found a ceiling of resistance for oil at $56 a barrel, and if it breaks above that level she thinks it could run up to $63. On the flipside, she found a floor of support at $46 and if it breaks below that level, crude could plunge to $40.

With all of these technical signals in play, Garner found the price of oil to be very murky. She said there is a fifty-fifty proposition on whether oil goes higher or lower at current levels.

Ultimately, Cramer likes oil stocks in this environment, but warned that investors need to believe they can do well, even if crude stalls out. His top pick was Magellan Midstream Partners.

"This is still one more reason why I think the pipelines are the best way to play the oil patch," Cramer said.

Questions for Cramer?
Call Cramer: 1-800-743-CNBC

Want to take a deep dive into Cramer's world? Hit him up!
Mad Money Twitter - Jim Cramer Twitter - Facebook - Instagram - Vine

Questions, comments, suggestions for the "Mad Money" website? madcap@cnbc.com