×

Look for a Crude Oil Spike: Trader

Laurel, Montana
Paul Souders | Image Bank | Getty Images
Laurel, Montana

Crude oil was extremely volatile last week, with big moves both to the upside and the downside, but one pattern did emerge. The range it has traded in has held over the last few weeks. Crude oil has been a sell in the $96.50 to $97 areas, and a buy between $93 and $92.

But let's take a closer look. I would like to buy dips in crude this week for two reasons.

First, as we head toward Memorial Day weekend, demand for products picks up. This applies to gasoline to be sure, but in addition, demand for ultralow sulfur diesel (the former heating oil contract) has been strong, so that alone should keep crude supported for this week.

Second, there are rumblings on the geopolitical front. Syria is still out of control, Iran nuclear talks are going nowhere, and over the weekend, North Korea launched short-range missiles.

(Read More: North Korea Fires Short-Range Missiles for Second Day)

Because of these overhanging geopolitical factors, if you are shorting crude, you have to place stops. Indeed, if something breaks out, crude could instantly pop $20. That has always been the interesting dynamic of crude: Any news about it usually means it will spike higher.

Only economic weakness sends it lower. And for now, the U.S. seems stronger, and demand worldwide has been growing.

So where would I buy in to this market?

The support areas at which I would look to buy are $95 to $94.50,and then $94 to $93.50. I would sell cautiously between $96.50 and $97.50, with a tight stop above $97.50. But I would rather trade it from the long side right now.

Anthony Grisanti is the founder and president of GRZ Energy. Follow him on Twitter: @AnthonyGriz

Watch "Futures Now" Tuesdays & Thursdays 1 p.m. ET exclusively on FuturesNow.CNBC.com!

Like us on Facebook! Facebook.com/CNBCFuturesNow

Follow us on Twitter! @CNBCFuturesNow

Videos

  • Rates are entering a new phase in their cycle: Yamada

    Bonds are entering a new rising rates cycle for the first time in decades. Technician Louise Yamada explains what this means for the market.

  • What's next for the oil market?

    Following a recent correction, Tom Kloza of the Oil Price Information Service tells CNBC's Jackie DeAngelis where crude is headed next.

  • Futures Now, February 15, 2018

    The market's coming back, but one trader isn't buying the bounce. Technician Louise Yamada says this is the next line in the sand for rates. And Oil's back at $60, but Tom Kloza, Oil Price Information Service, says the rally will stall, with CNBC's Jackie DeAngelis and the Futures Now traders.

Host Bio & Watch Now

Trader Bios