Crude rally to come?

Oil Trading Alert

Trading position (short-term; our opinion): In our opinion no positions are justified from the risk/reward perspective.

On Friday, crude oil gained 1.82% as news of escalating tensions in Ukraine outweighed mixed U.S. economic data. Because of these circumstances, light crude bounced off a support zone created by the Fibonacci retracement levels and came back near the previous lows. Will we see further rally in the coming days?

On Friday, data showed that U.S. producer price inflation rose 0.1%, core producer price inflation (without food, energy and trade) rose 0.2% in July and U.S. industrial production rose 0.4% in the previous month. Although these numbers were quite positive, the preliminary Thomson Reuters/University of Michigan consumer sentiment index dropped to a nine-month low of 79.2 in August (missing analysts’ expectations for a rise to 82.5), while the New York Federal Reserve said that its Empire State manufacturing index fell to a four-month low of 14.69 this month from 25.60 in July.

Despite these mixed numbers, geopolitical events in Eastern Europe supported the price. News that Ukrainian troops destroyed a portion of a Russian column of armored vehicles inside the country fueled concerns that the conflict will escalate and disrupt crude shipments out of Russia. As a result, crude oil bounced off the recent lows and came back above $97 per barrel. Will the rally continue? Let’s check what can we infer from the technical picture (charts courtesy of http://stockcharts.com).
 



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