Crude Oil Notches First Close above $110

Apr 10, 2008: 7:50 PM CST

For the first time in the contract’s life, Crude Oil prices have closed above $110 per barrel.

Price has completed a consolidation pattern, and this is the critical level which will determine if price remains above this consolidation ‘value’ zone, or if it has built a sufficient base to trade higher and seek value at a higher level.

A positive momentum divergence preceded the most recent up-move, as the contract has stayed in a solid and confirmed uptrend.

Let’s look at the structure of the weekly chart:

Price appears to be headed higher, if a sufficient base was formed at the $100 level. Higher oil prices drag down consumer and business spending, putting further pressure on an already potentially weak economy.

Traditionally, reduced economic expectations will serve to decrease demand, and decreased demand drives down oil prices. The chart seems to be denying this reality at the moment and it is uncertain which ‘reality’ will play out in the end.

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Even if you are an ‘equity only’ trader, always keep an eye on what commodity prices, especially crude oil prices, are doing and where they might be headed.

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