NEW YORK: 2.10.12 US crude oil futures ended a volatile week higher with prices looking like they would aim for a key upside target, but instead pulled back on Friday to the middle of their three-month range, while still setting up for a future advance.
After three consecutive higher settlements, and many gyrations over the week, the New York Mercantile Exchange’s March crude contract ended at $98.67 a barrel, a $1.17 loss on the day, though an 83-cent weekly gain.
Several technical analysts said their medium-term call is neutral for crude futures, but they maintain their bullish view down the road.
“We are bullish for crude oil,” said the Barclays Capital Technical Focus note.
For the past few weeks, prices have seesawed roughly around $100 a barrel, a pattern that is likely to continue for awhile, hence the neutral view.
“A break above $100.40 in WTI would confirm further upside toward our initial target at $102.25, and then $103.90,” said Barclays chartists.
Societe Generale’s technical note defined US oil’s range even tighter, setting near-term resistance at $100. A break down from current levels could lead to 97.30 and 96.55, or even $95.85 a barrel.
Or, “by surpassing the resistance region at $100, the recovery will accelerate to $100.65 and $101.29 or even $102 (a prior high) to $102.25,” the technicians said.
Adam Sarhan, technical analyst at Sarhan Capital, pointed out that oil continues to consolidate its giant rally from the 12-1/2-month bottom hit on Oct. 4 at $74.95 up to the peak set on Nov. 17 at $103.37, its highest level in about six months.
The fast and steep gains, up 33 percent in about 5 weeks, mean oil prices will need to take a while to absorb those gains between its well-defined range of $92.50 and $104 per barrel.
“That was a tremendous move higher, in just a short amount of time. The market is merely pausing to consolidate that move,” said Sarhan.
He added that the consolidation remains healthy for the market, as long as prices stay below resistance just under $104.
Several attempts to approach that level have failed, with a double top set near $103.75. Similarly, support for the sideways move lies at the double bottom set in mid-December near $92.50.
Subsequent declines have held onto levels above $95, and Friday’s steep drop was no exception. March crude’s losses stopped at $97.32, where buyers swooped in.
While oil could still break out of its range in either direction, the bias currently lies to the upside.
During the three months that oil has trekked sideways, it spent most of its time in the upper half of the band. Like a compressed coil, the longer oil trades sideways within the upper portion of its range, the more powerful the buy signal once it does break out, said Sarhan.
“I like to say the next move wins. Right now nobody knows what will happen. But if it breaks above $103, the odds favor that a new uptrend will commence,” said Sarhan.