Despite news that OPEC will cut production by 1 million barrels per day, crude fell below $59. The market also shrugged off news of the unrest in Nigeria which implies a significant shift in sentiment which in months gone past would have resulted in surge in prices. Which suggests the market is pricing in demand reduction and does not believe that OPEC will go ahead with the quota cuts.

Crude Oil dips below $59, will to still go higher ?

1. Trend lines-Crude bounced at the main uptrendline support area at 60, which implies immediate support to prices despite today dip, the downside appears limited. The down trendline from the High cuts in at 70 which represents resistance.
2. MACD - (Bottom indicator) Shows a very oversold state and crude oil is due for a bounce higher.
3. 40 week Moving Average - The cross below the 50 week average, which supported the bull market , implies that crude will eventually trend towards the 200 week MA currently at about 48..
5. Support & Resistance - Support is at 56, and resistance is at 70. Therefore crude looks range bound.

Summary - Crude oil looks like moving in a range between $70 and $56 for the forseable future, So trade points would be buying a bounce off of 56 and selling a reaction from 70, with stops above and below the respective highs and lows.

Nadeem Walayat

(c) MarketOracle.co.uk 2005-2006

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