WTI Crude: Await A Breakout, May Test $89.80 Reference

January Nymex crude oil futures have been trading within last Tuesday's (11/20/12) 86.17 to 88.79 range for the past four days. Additionally, Monday is "inside day" (Monday's range is within Friday's range) is another form of balance. An "inside day" within a tight five-day balance is a "balance within a balance."

Breakout
When a volatile market such as crude oil is contained within such a tight balance for an extended period of time, a significant move usually follows the breakout from that balance.

First Step
The first step is to see which way the market breaks from the "inside day." If the market breaks from Monday's inside day to the upside day, the likely scenario is that it tests last Tuesday's 88.79 high. If the market breaks from the inside day to the downside, the likely scenario is that it tests Tuesdays 86.17 low.

Second Step
The second step is to gain so-called "acceptance" outside last Tuesdays 86.17 to 88.79 range

Key Levels
The market may remain within last Tuesday's range for the next several days, but it is beat to be prepared for when the break from balance happens. If the market gains acceptance above last Tuesday's 88.79 high, it may test the 89.80 reference.

If the market gains acceptance below last Tuesday's 86.17 low, it may test the 85.10 reference

By Joseph Souhlakis
Joseph Souhlakis began his career in commodities in early 2000 when he took a clerk job at the NYMEX for MBF Clearing Corp. Souhlakis acted as risk and position manager for some of the most successful traders in the crude oil and heating oil pits for more than three years. In 2003, with the backing of Mark Fisher and MBF Clearing Corp., Joe became a NYMEX member and began his trading career. Souhlakis remained as a house trader for MBF Clearing Corp. until January 2007 when he became an independent trader.In January 2008, Joe made the full-time switch from floor trader to electronic trading from home.