While it may be too early to call a top in crude, today’s action is negative. Not only is there a “double top” on the daily chart, there is a reversal on the daily chart. A disciplined trader should wait for some follow through and confirmation of a reversal before getting too aggressively bearish at this point. A close below $48.50 would further encourage additional selling to test levels between $47.00 and $46.00.
The $50.00 level in crude oil is pivotal and may be enough now for profit taking selling to turn into short selling. It’s always a level on the chart that turns a market around, but it’s also about the supply side fundamental. When crude oil gets to or above $50.00, North American crude production is inevitably going to increase. Furthermore we are expected to believe that the members of OPEC are compliant with agreements to cut, or at least hold current output levels of production. No way, OPEC members are likely increasing production at these levels. I think that it is time for crude oil prices to begin moving lower again, barring any unforeseen interruption in supply. Geo-politics will always be a wild card.
It has taken the market about five weeks to add $8.00 of premium to the price of crude oil. We can see $4.00 of the rally evaporate very quickly.
Sep ’17 Crude Light Daily Chart