Okay, I finally get to say it! It has been a big, interesting week for crude oil!
After months of essentially range trading, with the main WTI futures contract, CL, staying within a narrow, slightly upward sloping channel, we have finally seen some directional action over the last three days.
Cl, after a failed attempt on Wednesday, broke down through the 50-Day Moving Average (MA) yesterday. From there, anybody who understands the mentality of institutional traders could have told you that an attempt at the trend line that marks the bottom of the channel was next. Sure enough, that came before the end of the day.
That attempt, however, failed initially. CL hit a low of $40.22, right on the line, before a rapid bounce led to a close at $41.28. The question for traders and, given the overall importance of crude futures in the sector, all energy investors, is does this signal the beginning of a significant move down, or does the support hold and therefore emerge even stronger?
From a technical perspective, the fact that as I write, CL is once again challenging that trend line suggests that it could break soon, but it is the circumstances of this morning’s weakness that seem to give the best clue as to what to expect from here. It is coming after the Bureau of Labor Statistics (BLS) Monthly Jobs Report for August showed an increase of nearly 1.4 million in non-farm payrolls and a drop in the unemployment rate, from 10.2% to 8.4%.