May crude oil futures surged early last week, but the rally stalled when the market reached the lower level of our target zone at $94.44. The actual high was $94.47. This was a sign that technical traders were still in control.
Based on the longer-term range of $99.10 to $89.78, a retracement zone has formed at $94.44 to $95.54. The inability to break through this zone is a strong indication that sellers are still guiding the market. The short-term range at $89.78 to $94.47 has formed a retracement zone at $92.13 to $91.57. Since the attempt to rally failed, the market is likely to retrace back into support where buyers will have to decide to defend it, or let it go to lower levels.
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Additional support comes in at $92.78 while resistance moves down to $93.10. Due to conflicting fundamentals, the market may “ping-pong” in a range for a couple of weeks.
Some traders feel that the improving economy should increase demand for crude oil and are willing to support it on the breaks. Others feel, however that the strong U.S. Dollar and uncertainty over the global economy will keep inventories at high levels, and thus draw the attention of short-sellers.
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