Crude Oil futures (symbol: CL) have broken out of the $75-115/bbl trading range initiated back in Oct10. The daily lows of 13 and 14Nov14 broke below the very significant support level at $74.95/bbl. Our previous post of 16Oct14, Crude Oil … Testing The $75-80 Zone, discussed the need to test the $74.95/bbl support level as well as the potential implications of a failure of that very significant support.
The increased volatility corresponding to the recent selloff provides an indication of the strength of trend. While the stochastic and RSI indicators have entered oversold mode, prices can still continue lower. As an example, take a look at the reverse situation when prices rallied into the Jul08 high.
We expect lower crude oil prices are on the way, however not necessarily immediately. Expect a backtest of the $80-88/bbl level prior to lower. The next target lower is the $64.24/bbl level based on the May10 low. Failure of $64.24 likely means a retest of the major $32.48/bbl support dating back to Dec08.
Murphy & Co’s Crude Oil model is currently flat, holding no position. To learn more about Murphy & Co’s position models, visit http://murphycofutures.com/position-models/