Monday, May 7, 2012

Short Covering Rally in Crude Oil Tempers Early Session Losses

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Crude oil [June contract] closed lower on Friday and below the 38% retracement level of the 2011-2012 rally crossing at 98.15. A short covering rally tempered early session losses and the high range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near term. If June extends this month's decline, the 50% retracement level of the 2011-2012 rally crossing at 94.04 is the next downside target. Closes above the 20 day moving average crossing at 103.27 are needed to confirm that a low has been posted. First resistance is the 20 day moving average crossing at 103.27. Second resistance is last Tuesday's high crossing at 106.43. First support is today's low crossing at 95.34. Second support is the 50% retracement level of the 2011-2012 rally crossing at 94.04.

Natural gas closed higher on Monday as it extended last week's trading range. The high range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term. If June extends the rally off last week's low, the reaction high crossing at 2.607 is the next upside target. Closes below the 20 day moving average crossing at 2.157 would signal that a short term top has been posted. First resistance is last Tuesday's high crossing at 2.385. Second resistance is the reaction high crossing at 2.607. First support is the 20 day moving average crossing at 2.157. Second support is the reaction low crossing at 1.982.

Gold closed lower on Monday and the mid-range close sets the stage for a steady opening on Tuesday. Stochastics and the RSI are bearish signaling sideways to lower prices are possible near term. If June renews the decline off February's high, the 75% retracement level of the December-February rally crossing at 1595.00 is the next downside target. Closes above the reaction high crossing at 1699.60 are needed to confirm that a short term low has been posted. First resistance is the reaction high crossing at 1681.30. Second resistance is the reaction high crossing at 1699.60. First support is April's low crossing at 1613.00. Second support is the 75% retracement level of the December-February rally crossing at 1595.00.

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