Crude oil has been trading sideways for the past year between the 2011 high and low. The trading range through 2012 has been contracting with a series of lower highs and higher lows. This pennant formation, because it is taking place after an uptrend, is a bullish pattern with $110 and possibly even $140+ per barrel in the next 6-18 months.
If you look at the weekly investing chart of crude oil, the key support and resistance levels are clearly marked. A breakout of the white pennant will trigger a move to the next support or resistance level. And judging from the positive economic numbers not only from the US but globally, the odds are increased for the $110+ price target to be reached sooner than later.
Crude Oil Price Chart – Weekly Investing
Crude Oil Price Chart – Daily Short Term Analysis and Target
If we zoom into the daily chart and analyze price and volume, you will notice the $100 per barrel level is potentially only two to three days away. But keep in mind whole numbers (decade and century numbers) naturally act as support and resistance levels. So when the $100 century price is reached, there will be a wave of sellers with fat thumbs who will slam the price back down to $96 and possibly back down to the $92 level before oil continues higher.
Utility Stocks – Utilities SPDR ETF (NYSEARCA:XLU) – Weekly Investing Chart
The utility sector has done well and continues to look very bullish for 2013. This high-dividend-paying sector is liked by many and the price action speaks for itself.
Energy Sector Weekly Investing Chart
Energy stocks, which can be followed using the Energy Select Sector SPDR ETF
(NYSEARCA:XLE) typically leads the price of oil. Looking at energy stocks we can see that they are outperforming the price of crude oil and are on the verge of breaking out of a large cup & handle pattern. If so, then $90 is the next stop, but prices may go much higher in the long run.
Energy Stocks and Crude Oil Conclusion
In short, crude oil is stuck in a large trading range, much like gold and silver which I just wrote about in Precious Metals, Miners Making Waves and New Trends
Once a breakout takes place on either the white or yellow lines on the first crude oil weekly chart, we should see oil, energy, and utility stocks start making some big moves. Depending on the direction of the breakout (up or down) it must be played in that direction to generate substantial profits.
Editor's Note: Chris Vermeulen offers more content at his sites, TheGoldAndOilGuy.com and Traders Video Playbook.
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.