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Jim Hyerczyk

Jim Hyerczyk

Fundamental and technical analyst with 30 years experience.

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Price Action Suggests Bullish Investor Sentiment

The price action by August Crude Oil futures is once again suggesting a balanced market. The low to high price action for the week suggests volatility, but the top to bottom action since May 6 indicates a balanced market and a sideways trade. This assessment could change significantly over the next several weeks if demand continues to increase at its current rate.

The market posted a strong rally last week, even taking out the previous week’s high at $61.83 before settling inside a 50% to 61.8% retracement zone. The actual bottom of the current upswing came in on June 5. The lack of surprises in last week’s OPEC announcement helped fuel a rally from $57.21 to $62.22.

OPEC said in its announcement that it would maintain its production targets at 30 million barrels per day through at least November. This is what traders were looking for so the announcement offered no surprises. Instead it turned into a “sell the rumor, buy the fact” situation. This type of price action appears quite frequently in the futures markets because they are highly speculative by nature.

The first rally from the $57.21 low on June 5 may have been fueled by short-covering, but buyers eventually jumped in to drive the market higher because of a decline in the U.S. dollar and the release of a bullish inventories report.

The Energy Information Administration said in its weekly inventories report for the week-ended June 5 that crude inventories declined 6.8…

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