Middle East risks keep oil supported
Crude oil is moving back toward the $100 level today as Middle East risks give buyers another reason to push prices higher.
In Adam’s post , he outlines the bullish fundamental backdrop for oil: increased military risks involving the US and Israel, a continuing stalemate, and recent Houthi activity in Saudi Arabia adding to the anxiety. A war that was supposed to be quick and easy continues to drag on, keeping concerns about energy supplies firmly in play.
The fundamental story is supportive. The technical price action is helping to confirm that story.
The moving averages help tell the story
Since bottoming on October 6 near $86.93—the 50% midpoint of the move higher from the July 2 low—crude oil has recovered above its 100- and 200-hour moving averages, shown by the blue and green lines on the chart above. Those moving averages have since helped define support and keep the buyers in control.
Initially, the 100-hour moving average provided support. More recently, sellers have managed to push below that faster-moving average, but the breaks have lacked follow-through. The rising 200-hour moving average has held, giving buyers a level to lean against before pushing the price back higher.
That distinction is important for traders. A break below the 100-hour moving average gives sellers an opening. Holding above the 200-hour moving average keeps the buyers in play. To shift control, sellers need to break support and stay below it.
Buyers regain the upper hand today
Today followed that same pattern. The price moved below the 100-hour moving average, held above the 200-hour moving average, and then rebounded back above the 100-hour moving average at $98.23. That recovery puts the buyers back in firmer control as the price works toward $100.
The sellers had their shot below the 100-hour moving average. They could not build on it. Now they need another break—and more follow-through—to threaten the buyers’ control.
What would change the technical picture?
There are three downside levels to watch:
$98.23: The 100-hour moving average. A move back below would give sellers some hope, especially if the price stays below.
$97.00: The next support level. Breaking below would add to the evidence that sellers are gaining traction.
$96.28: The rising 200-hour moving average. A sustained break below would tilt the short-term technical bias back toward the sellers.
Until those levels give way, the sellers have more to prove. Above the 100-hour moving average, buyers remain in control. Below that level but above the 200-hour moving average, buyers remain in play, although their grip becomes less secure.
The trading lesson: Let price confirm the story
The headlines help explain why oil is rising, but the technical levels help traders define risk and recognize when the price action stops supporting the story.
You can have a bullish fundamental view and still need a level that tells you when that view is losing support. For crude oil, the moving averages provide those reference points.
In the video above, I walk through those support levels, explain how the moving averages have guided the move higher, and outline what sellers need to do to take back control.
This article was written by Greg Michalowski at investinglive.com.
