After several days of consolidation, nearby crude oil futures soared, setting up the market for further upside action. The positive reaction is being attributed to bullish comments from European Central Bank President Mario Draghi and greater demand for higher risk assets. Draghi’s comments and a better-than-expected Spanish Bond auction may have helped fuel the breakout rally, but it has been the positive outlook for an improving U.S. economy that has underpinned the crude oil market for several weeks.
Another sign supporting higher prices or at least helping to establish a solid support base is the news that money managers increased net-long positions by 11 percent in the week ended January 1. According to the Commodity Futures Trading Commission’s Commitments of Traders report dated January 4, this increase represented the highest level since October 16.
In addition to the CFTC, according to data from the ICE Futures Europe exchange, money managers in London increased their net long positions to their highest level in nine months.
Conventional chart pattern analysis has determined that the daily nearby crude oil futures contract is currently testing a major retracement zone. Although the main trend is up due to the series of higher-tops and higher-bottoms, the market is nearing a previous top at $94.99 and the Fibonacci price level at $95.54. Although momentum is currently driving the market higher, tests of both of these levels…