WTI Crude Oil
The WTI Crude Oil market initially rallied during the day on Friday but fell significantly and ended up breaking below the $37 level. On top of that, we close at the very bottom of the candle which of course is always a very bearish sign. With that being the case, I believe that we are now getting ready to test the support at the $36 handle, which is an area that has been supportive recently. I think we will break below there though, especially if we can get some type of bullish momentum building up in the US dollar. If that’s the case, we will more than likely fall to the $34 level next. In my estimation, short-term rallies that show signs of exhaustion can also be used in order to start selling again.
Natural Gas
Natural gas went back and forth during the course of the day on Friday, forming a neutral candle as we continue to hover just below the $2 barrier. I believe that $2 will continue to be the ceiling in this market and that natural gas will struggle to get above that level anytime soon. Even if it does, there is a massive amount of resistance all the way to the $2.10 level, so at this point in time I’m simply looking for signs of exhaustion in order to sell or a break down below the bottom of the range for Friday would do as well. At that point, one would have to think that the market would reach towards the $1.80 level, which of course was the scene of the last bounce.
The supply of natural gas around the world is such that we have almost no storage space. In that type of situation, it’s difficult to support pricing power for any real length of time so I continue to look at rallies as imitations to start shorting again.
