Crude oil is on a tear so far this week.
It started with the March 28th bullish pin bar from the 58.20 support area.
Fast forward to this week, and crude is trading up around 62.60. It’s been an impressive four-day rally to be sure.
However, buyers haven’t had much of a test since climbing above 58.20.
Sure, the 60.30 area capped the late March advance. But 60.30 pales in comparison to what lies above at 63.70/80.
Let’s run through a few reasons why I like 63.70/80…
1) It’s the level that provided support for crude oil in June and August of last year.
As we know, old support becomes new resistance. So the fact that this area served as support last year means it will likely act as new resistance this year.
2) The 63.70/80 area lines up nicely with what could be ascending channel resistance.
It isn’t the most established channel, but resistance could become a factor nonetheless.
3) The 61.8% Fibonacci of the aggressive selloff that commenced last October comes in at 63.60.
That selloff took oil from 76.70 to 42.40 in less than three months. It’s significance, and resulting Fibonacci levels shouldn’t be discounted.
Those are three valid reasons why this market may begin to struggle as it approaches the area between 63.70 and 63.80.
So what should we do with that information?
Well, if you’re long crude oil, you may want to think about booking at least some profit at 63.70/80 should buyers begin to falter.
And if you’re considering shorting oil in this area, I would require bearish price action such as a pin bar or engulfing pattern before doing so.
Without a signal that buyers are tiring, selling into a strong uptrend like this is a risky endeavor even at a critical area like 63.70/80.
Remember that watching from the sideline is always a viable option.
In fact, it’s preferred unless you have a setup that fits your criteria. Until then it’s a wait-and-see market.
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IMPORTANT: I use New York close charts so that each day closes at 5 pm EST.
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