Traders Are Taking Profit In Crude After Friday’s Gains

Investors are taking profits in crude after Friday’s impressive gains.  Friday’s jump came on large volume as crude futures manage to get back into the 4/9-4/17 trading range.  The positive performance in crude was in reaction to better than expected Manufacturing PMIs from both America and Britain.  More manufacturing implies greater consumption of crude during the production process and transportation of finished goods.  As a result, crude has completely recovered 4/20’s steep losses while trading comfortably above the highly psychological $50/bbl.  Even more impressive, the rise in crude comes in the face of a 3^rd straight week of climbing inventories.  Therefore, crude futures are riding on the back of rising U.S. equities and improvement in economic data as investors discount the present decline in consumption of crude and look into the future.

Technically speaking, crude futures need to get above the mess of March and April highs in order to log substantial gains, which will likely require large volume.  Meanwhile, crude is turning its back on $50/bbl, a positive development psychologically.  The momentum is in the favor of the upside at the moment as it is with U.S. equities.  Therefore, we maintain our positive stance on Crude for the time being.  However, whether crude sets a new 2009 high ultimately depends on the S&P futures’ ability to overcome 900.

Fundamentally, we find supports of $53.16/bbl, $52.83/bbl, $52.29/bbl, $51.98/bbl, and $51.66/bbl.  To the topside, we see resistances of $53.63/bbl, $53.97/bbl, $54.34/bbl, $54.77/bbl, and $55.24/bbl.  $50/bbl turns becomes a key psychological cushion again while $55/bbl serves as a psychological cushion.  Crude is presently trading at $53.60/bbl.

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