WTI Crude – Support at $43 Needs to Hold

WTI Crude (44.16)

Some points to consider in this commodity market:

• Two month support now coming under pressure.
• There is a morning star in late October which could provide technical guidance going forward.
• Trade strategy: Stand aside

The strength of the US Dollar has left no financial market safe. This includes WTI Crude, and even copper which is the leading indicator thanks to its usefulness for new construction projects. Copper continues to move lower taking many other commodities with it. With higher rates looming out of the US Federal Reserve, money for new construction projects would be more expensive. This would affect demand for metals like copper and energies like oil. We are hoping that China will be the largest driver of demand for the black gold, even though there is very little global demand.

Technical Analysis

Let’s look at today’s WTI Crude analysis. Focus is now on the range floor which is around the $43 per barrel to $42 per barrel area. This is now long-term support. Should this area break then we could move back towards the August lows around $37 per barrel. There is trend line support lining up at 42.58 today. This is another key level that needs to hold or the bulls will go back into hiding and the bears will come out of hibernation.

Trade Strategy

There is also the strong US Dollar that will weigh heavily on crude oil. This could bring about what we call a pain trade which would sink oil even further. This could be an aggressive tumble lower. There is little reason to bet against the strength of the Dollar right now. Right now, I am standing aside for a short trade. A break of the trend line could turn focus towards $32.50 per barrel which would make an attractive first short sale target. For today, I am flat with WTI crude.