By Russell Glaser – Spot crude oil prices received a bounce in today’s trading. This is the first gain for the commodity in almost 10 days. The rise in the price coincided with both positive fundamental data along with a technical boundary that the commodity ran into due to the recent sharp decline in the price of spot crude oil. Today’s rise in the price helped keep the recent bullish trend intact while setting up a buying opportunity.
The price of spot crude oil rose today to a high of $77 before falling back to close up at $76.20. The gain of 0.8% came after an opening day price of $75.57.
As of recent crude oil prices have been closely tracking the movements of the equity markets. The near term trend for the Dow Jones Industrial Average has turned lower but today the widely followed stock index finished the day higher by 1.60%.
Positive fundamental data helped move both equities and spot crude oil prices higher. New building permits for the U.S climbed 0.57M over the previous month. The reading was largely in line with economists’ expectations of 0.58M.
The sharp decline in the price of spot crude oil has made for a potential opportunity for traders to enter into the market long on the commodity. After falling $7, the drop in the value of the commodity failed to breach below the trend line that began on May 25th.
Technical indicators show the price may be in line for further gains. The bearish correction stalled during Friday’s trading that ended with a doji candlestick. This candlestick pattern signals indecision on the part of traders to send prices in any particular direction.
The bearish correction also failed to breach below the short term rising trend line, signaling the bullish uptrend is still valid and serves to reinforce the importance of this trend line.
A buy signal is also shown on the daily chart. The Slow Stochastic oscillator displays a bullish cross, indicating the next move of the price may be to the upside. The last time a bullish cross appeared on the stochastic, the price of spot crude oil rose to close above the significant resistance level of $80.
Resistance for spot crude oil trading is found at $78 (R1), followed by 79.90 (R2), and the August high at $83. Support comes in at the low of this week’s trading at $74.85 (S1), just below the rising trend line. Should the price close below this support level, it would signal a shift in the trend to the downside.
Forex Market Analysis provided by ForexYard.
© 2006 by FxYard Ltd
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