Not much has changed for oil market (price action) since the start of 2017 – and even that might be an understatement. The range in crude oil futures, between 52.00 handle and the 55.00 handle, is likely reaching a boiling point, however, while in this range its treacherous trading. For the fifth consecutive report, the EIA reported a build in crude inventories of 1.5 million barrels. The reaction from April crude was as expected, with yet another selloff in crude to the low end of its range. The selloffs post these reports have all been faded, and crude has continued to test its range highs with little regard for fundamental opinions.
From a technical perspective, let the broken record spin! April crude, while it looks prime to break out of its range… is still in a range. Caught below the 55.00 handle resistance form prior highs, and above the 52.00 handle supportive range, I expect consolidation to continue. I am cautiously optimistic we will see this range resolve higher, and in the near term, a push to test the continuous contract highs into the 56.76 area may be early confirmation of the bulls taking over. While above 52.00 in the April crude futures, I expect continuation in this range and for crude to catch a bid to test back towards the 54.00 handle in the near term. Below 52.00 – specifically the 51.87 April contract lows from February - could open the door towards the next tier of support into the 50.45 50% Fibonacci support level.
In my opinion, traders will need to continue to expect range bound price action and consolidation above the 52.00 supportive price band, but below the 56.76 prior highs. While the recent price action has pulled the market back a bit, the fact remains that this market is still in its treacherous range. If the price of crude does begin to break down further, and can close below the 51.87 recent lows in the April contract, I expect the next supportive price band into the 50 to 49 handles. In due time, this range will break, and when it does the weeks of building positions (and stops above and below the range) should produce a solid move (one way or the other). Define your risk, pick a side, and get ready for what could be a volatile ride.
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Senior Market Strategist
Dan started his career as an arbitrage clerk in the Euro Dollar pit on the floor of the CME. After graduating from the University of Notre Dame, he leveraged his computer science background and started his trading career developing both automate and discretionary trading systems. Dan has spent the last 5 years trading his own account, concentrating primarily in the currency and grains markets. Most recently he has joined RJO Futures as a Market Strategist.