Chart Of The Day: Crude Oil Break Out?

Apologies for the lack of updates in recent days. Yes, the market has had some significant movements for traders, however nothing too dramatic for a longer term investor. Stocks are still barely clinging onto a technical uptrend, however there are more signs that it is fast approaching its end. On the other hand, not a lot to discuss in the currency and commodity markets either, as downtrends remain in place (especially in metals and agriculture). Recent FOMC meeting has just been noise really. Nevertheless, let us cover an interesting chart.

Chart 1: Is Crude Oil staging a breakout or will it a bear trap?

Is Crude Oil staging a breakout out of its prolonged consolidation? Or will this be a false break and a bear trap? Both West Texas and Brent crude have not performed well since May 2011 so it has been more then two years since the uptrend ended. Price wise, I would like to see a move above a $100 to confirm the bullish rally. This would signal two major technical developments: 1) a break of $100 resistance, which has also been in place since the later parts of 2012; and 2) a break out of a triangular two year consolation. Sentiment here remains mixed with extreme bullish bets on Crude Oil warning us of a potential slide in prices, while Heating Oil (correlates very closely to Brent crude) shows record extreme bearish bets signalling a possibility of a large upside.

By the way, make sure you sign up for the up and coming newsletter, if you already haven't. I will be discussing Agricultural commodities, demand and supply, emerging market demand (in particular Chinese demand for grains) and so forth. Expect the newsletter to be released in coming days. Finally, an in depth sentiment post will be featured this weekend, including the latest Merrill Lynch Fund Managers Survey!