Crude Oil Higher on Overnight Consolidation, Bears Maintain The Clear Advantage

Crude oil was slightly higher due to short covering overnight as it consolidates some of this month's decline. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term.

If January extends the decline off October's high, the 87% retracement level of this fall's rally crossing at 68.16 is the next downside target. Closes above the 20 day moving average crossing at 75.19 are needed to confirm that a short term low has been posted.

Tuesday's pivot point, our line in the sand is 69.44

First resistance is the 10 day moving average crossing at 72.53
Second resistance is the 20 day moving average crossing at 75.19

First support is Monday's low crossing at 68.59
Second support is the 87% retracement level of this fall's rally crossing at 68.16

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Natural gas was higher overnight as it extends last week's rally. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term. If January extends this month's rally, the 62% retracement level of the October-December decline crossing at 5.565 is the next upside target.

Closes below the 20 day moving average crossing at 4.916 would temper the near term bullish outlook in the market.

Natural gas pivot point for Tuesday is 5.311

First resistance is the overnight high crossing at 5.422
Second resistance is the 62% retracement level of the October-December decline crossing at 5.565

First support is the 10 day moving average crossing at 4.976
Second support is the 20 day moving average crossing at 4.916

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The U.S. Dollar was higher overnight as it extends this month's rally and exceeded November's high crossing at 77.27. Stochastics and the RSI are overbought but are neutral signaling that additional gains are possible near term.

If March extends this month's rally, the reaction high crossing at 77.81 is the next upside target. Closes below the 20 day moving average crossing at 75.83 would confirm that a short term top has been posted.

First resistance is the overnight high crossing at 77.33
Second resistance is the reaction high crossing at 77.81

First support is the 10 day moving average crossing at 76.29
Second support is the 20 day moving average crossing at 75.83

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Crude Oil and Natural Gas Technical Outlook For Tuesday Morning

Nymex Crude Oil (CL)

With 4 hours MACD staying above signal line, some more sideway trading could be seen in crude oil. But such consolidation should be relatively brief. Below 68.59 will target 65.05 support next. Above 71.20 will bring stronger rebound to 4 hours 55 EMA (now at 72.30) and possibly above. But upside should be limited well below 79.04 resistance and bring fall resumption.

In the bigger picture, we're favoring the case that medium term rise from 33.2 has completed at 82.0 with bearish divergence condition in daily MACD. The break of medium term trend line support last week affirms this case and should pave the way to 58.32 cluster support (50% retracement of 33.2 to 82 at 57.60) for confirmation. As noted before, rise from 33.2 is treated as part of the correction pattern that started at 147.27. Firmed break of 58.32 support will argue that the down trend from 147.27 might be resuming for another low below 33.2. On the upside, break of 79.04 is needed to invalidate this view, otherwise, outlook will remain bearish.....Nymex Crude Oil Continuous Contract 4 Hours Chart.

Nymex Natural Gas (NG)

Further rise in Natural gas is still in favor with 4.837 support intact. Sustained trading above 5.318 will confirm that rise from 2.409 has resumed and should target 61.8% projection of 2.409 to 5.318 from 4.157 at 5.955 next. On the downside, through, a break below 4.837 support will indicate that recent consolidation is still in progress inside and another fall should be seen towards lower side of recent range near to 4.157. But after all, we'd expect downside to be contained there and bring an eventual upside breakout.

In the bigger picture, medium term fall from 13.69 is treated as part of the long term consolidation pattern that started at 15.78 back in 2005 and might have completed at 2.409 already. Rise from 2.409 should not be completed yet and we would continue to anticipate an upside breakout of the recent range of 4.157/5.138 eventually. Above 5.318 will target 38.2% retracement of 13.694 to 2.409 at 6.72 and beyond. Nevertheless, break of 4.157 support will dampen this bullish case and turn outlook mixed again.....Nymex Natural Gas Continuous Contract 4 Hours Chart.

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Phil Flynn: Dubious Dubai

Dubai gets a bailout and the risk appetite tries to come back but oil is still being held back by a load of supply. Supply gluts put oil back into a rut on signs that OPEC is cheating more each day. OPEC compliance to production targets fell to just 58% which is the worst score for the cartel since the financial crisis began. The biggest cheaters were Iran and Angola but also, believe it or not, Nigeria's production has come back much faster than expected after the country was plagued with rebel attacks on its infrastructure.

The reasons for the cheating on production quotas within OPEC are varied. There is the greed angle but part of it is there are those who actually want to purchase the oil. Oh sure it is easy to comply with your production targets when there are no buyers for your oil but not so much when you can actually find some buyers.....Read the entire article.


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Where is Crude Oil Headed on Tuesday?

CNBC's Sharon Epperson discusses the day's activity in the commodities markets, and looks ahead to where oil is likely headed tomorrow.




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Crude Oil Closes Lower, Setting The Stage For Continued Lower Prices

Crude oil closed lower on Monday and below the 75% retracement level of this fall's rally crossing at 70.23 as it extended the decline off October's high. The mid range close sets the stage for a steady to lower opening on Tuesday.

If January extends the decline off October's high, the 87% retracement level of this fall's rally crossing at 68.16 is the next downside target. Closes above the 20 day moving average crossing at 75.68 are needed to confirm that a short term low has been posted.

First resistance is the 10 day moving average crossing at 73.39
Second resistance is the 20 day moving average crossing at 75.68

First support is today's low crossing at 68.59
Second support is the 87% retracement level of this fall's rally crossing at 68.16

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Natural gas closed higher on Monday as it extends this month's rally. The mid range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term.

If January extends this month's rally, the 62% retracement level of this fall's decline crossing at 5.565 is the next upside target. Closes below the 20 day moving average crossing at 4.895 would temper the near term friendly outlook in the market.

First resistance is today's high crossing at 5.409
Second resistance is the 62% retracement level of this fall's decline crossing at 5.565

First support is the 10 day moving average crossing at 4.911
Second support is the 20 day moving average crossing at 4.895

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The U.S. Dollar closed lower due to profit taking on Monday as it consolidated some of last week's rally. The low range close sets the stage for a steady to lower 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 March extends its current rally, November's high crossing at 77.27 is the next upside target. Closes below the 20 day moving average crossing at 75.75 would temper the near term friendly outlook in the Dollar.

First resistance is last Friday's high crossing at 77.12
Second resistance is November's high crossing at 77.27

First support is the 10 day moving average crossing at 76.04
Second support is the 20 day moving average crossing at 75.75

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Oil Is Little Changed Amid Speculation of Weak Demand Recovery

Crude oil was little changed near a two month low amid speculation that demand will be slow to recover. Oil fell as much as 1.8 percent after reports showed declining industrial output in Europe and the smallest improvement this year in consumer confidence in Japan, the world’s third largest oil consumer. Equities rallied and the dollar weakened from a two month high, supporting prices. “You won’t have a truly healthy crude market and be able to argue for crude going above $80 until you see the developed market, North America, Europe and Asia, turn around,” said Roger Read, an analyst with Natixis Bleichroeder in Houston. He forecast oil would trade in a $60 to $80 range for the next few months.

Crude oil for January delivery rose 5 cents to $69.92 a barrel at 10:36 a.m. on the New York Mercantile Exchange. Oil has risen 57 percent this year. Earlier, futures touched $68.59, the lowest since Oct. 5. European industrial output fell for the first time in six months in October, led by a slump in consumer goods. Employment declined in the third quarter. The Tankan business confidence index in Japan showed large companies planned deeper spending cuts to protect earnings under threat from the yen, which climbed to a 14 month high against the dollar in November.....Read the entire article.


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ExxonMobil to Buy XTO for $41 Billion

Fox Business Networks's Shibani Joshi on ExxonMobil's acquisition of XTO Energy.



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Cardium Oil Play Valuations Setting Up Big Year for M&A in 2010

The new Cardium oil play in Alberta is rapidly approaching the stature of Saskatchewan’s famous Bakken play, and this is very good news for investors in Canada’s junior oil and gas sector. The four year old Bakken play has created huge shareholder wealth for investors, as companies like Crescent Point Energy and Petrobank bought out junior after junior after junior to increase their land base and production profile.

The same thing is now starting to happen in Alberta’s Cardium play. And valuations (read: stock prices) are getting much richer, much faster than what happened in the Bakken. As an example, TSX listed Result Energy is a Cardium focused play that was just taken over and re-capitalized by the management team from TriStar Oil and Gas, a Bakken play that itself was bought out in August 2009.

Brett Herman and his TriStar team announced several acquisitions immediately, and one Canadian analyst estimated they paid $275,000 per flowing barrel for them. As comparison, the average Canadian listed junior trades at about $60,000, the intermediates at $71,000, and if it’s a natural gas weighted producer, it can be as low as $30,000. Even the leading juniors in the more profitable Bakken play – Painted Pony Explorations would be a good example of this – trade at $140,000 per flowing barrel.....Read the entire article.


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Crude Oil Continues Lower as World Markets Rebound on Dubai Bailout

Crude oil was lower overnight as it extends this month's decline. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term.

If January extends the decline off October's high, the 87% retracement level of this fall's rally crossing at 68.16 is the next downside target. Closes above the 20 day moving average crossing at 75.67 are needed to confirm that a short term low has been posted.

Monday's pivot point, our line in the sand is 70.18

First resistance is the 10 day moving average crossing at 73.37
Second resistance is the 20 day moving average crossing at 75.67

First support is the overnight low crossing at 68.59
Second support is the 87% retracement level of this fall's rally crossing at 68.16

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Natural gas was higher overnight as it extends last week's rally. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term. If January extends last week's rally, the 62% retracement level of the October-December decline crossing at 5.565 is the next upside target.

Closes below the 20 day moving average crossing at 4.896 would temper the near term bullish outlook in the market.

Natural gas pivot for Monday is 5.22

First resistance is last Friday's high crossing at 5.375
Second resistance is the 62% retracement level of the October-December decline crossing at 5.565

First support is the 20 day moving average crossing at 4.896
Second support is this month's low crossing at 4.432

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The U.S. Dollar was lower due to profit taking overnight as it consolidates some of last Friday's rally. Stochastics and the RSI are overbought and are turning neutral hinting that a short term top might be in or is near.

If March extends last week's rally, November's high crossing at 77.27 is the next upside target. Closes below the 20 day moving average crossing at 75.76 would temper the near term bullish outlook in the market.

First resistance is last Friday's high crossing at 77.12
Second resistance is November's high crossing at 77.27

First support is the 10 day moving average crossing at 76.05
Second support is the 20 day moving average crossing at 75.76


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What’s Next for Stocks, Gold, Silver, Oil & Natural Gas?

The past three weeks have been interesting to watch as the Dow (DIA ETF) has broadened causing traders to be shaken in and out of positions. Commodities have been under pressure as the US dollar has risen. Below are some charts of these investments and what I think could happen in the next couple weeks.

DIA – Exchange Traded Fund
As you can see the broadening formation is bearish as it results in a short term pullback. This type of price action is what frustrates breakout and novice traders. As traders jump into positions once the previous high is broken, they hope for a rally. Instead the market briefly moves higher then reverses and moves down to penetrate the previous pivot low. This is where breakout traders place their stops and as the market knows this, it obliges by moving below this level to shake out these traders before it rallies again.

That being said, it looks like stocks could make a new high this week, just enough to suck in more short term breakout traders before rolling over once again to test a deeper support level. A pullback to the $99-100 level would make for a great buy point.


GLD – Gold Exchange Traded Fund
The strengthening dollar is putting pressure on precious metals with gold testing the first support level. Depending on what the dollar does in the coming days we could see gold test the second support level.

In my opinion gold can test the second support level without triggering any major sell signals for traders and investors. The trend will still be up and it is important to know the horizontal support level is more important than a trend line support level.



SLV – Exchange Traded Fund
Silver is in the same boat at gold. Only time will tell if we get a bounce or a further test lower. Either way, the underlying trend is still up and we will be able trade it.



USO – Oil Exchange Traded Fund
Oil broke down out of its bull flag last week and is currently testing both trend line support and horizontal support levels. We could see a short term bounce here to the $37, 38 or 40 levels. Taking money off the table at each resistance level and raising your stop is an important money management strategy I use for this type of play.

This is a high risk type of play which I am not taking part in. But I do find it fun to track plays like this for educational reasons.



UNG – Natural Gas Exchange Traded Fund
The natural gas fund is a touchy topic with so many traders. I get emails every day asking why I trade UNG because of the contango and the fact that so many people have lost money with it; they don’t want to touch it again. My answer is very simple, it works perfectly fine for short term trading which lasts 1-20 days. “If it works, Don’t Fix It”.
I do agree UNG is tougher than other ETFs to trade, but it still makes money and that is what our goal is.

Anyways natural gas has found some support and is bouncing around. We could see it trend sideways or up until a test of our blue resistance trend line is reached. From there we can asses the situation for a possible trade.

The underlying trend is down on the monthly and weekly charts so do not get too excited about going long anytime soon.



ETF Trading Conclusion:
Overall the market feels a little top heavy and the price action on the charts are saying the same thing. My short term indicators are telling me the Dow (DIA fund) is over bought and ready for a couple days of selling. With any luck we will see a test of support which will flush out most short term traders this week, then a nice low volume rally going into Christmas. On the other hand, the market has been holding up well and prices could continue to drift higher from here. If that is the case we simply continue to hold our current long positions and enjoy the ride.

Silver and gold are testing support levels and if the market continues to rally here, I figure precious metals will follow. But if we see stocks pull back and test support, then we will most likely see the metals pull back further also.

Crude oil has formed a scary looking chart as it flushes out traders on this recent drop. My general rule for spec plays is to buy when the chart looks scary, but is trading at multiple support levels. It is very difficult to buy at these levels but as my good buddy David Banister from ActiveTradingPartners.com always says, “Buy when they Cry, Sell when it’s Loud”. Meaning buy when everyone is panicking out of their positions, and sell when everyone is buying into the move usually seen by high volume levels and much higher prices.

Natural Gas is jumping around like crazy. We continue to wait for a tradable price pattern to form in conjunction with a support or resistance level to help put the odds more on our side.


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