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Friday, July 11, 2008

Crude Oil Testing 2008 Support Levels

This chart, courtesy of Chart of the Day, shows the current trend of West Texas Intermediate crude oil (WTIC) was up and the price was testing support two days ago.

Click charts to see full sized images

The last two days oil has rallied over $10 from $135 to its current price of $145.48!

If oil holds support and rallies to new highs, then a point and figure chart courtesy of, projects $172!
If oil breaks support (the green line on the first graph) then we could expect oil to find minor support (via PnF chart above) at $118, $110 and $99.

This chart suggests support for oil prices at $100 and then major support at $80. Destroy enough demand for oil with a global recession or increase supply by drilling for more oil or with a serious effort to bring alternative energy sources online and the next major support level is $37!

Let us look at the US Dollar to get a clue which way oil will go on the long term.

It appears the US Dollar has stopped its decline since bottoming earlier in the year. Perhaps we will see a reverse of this decline if the Fed raises rates a symbolic 25 or 50 basis points to show it is serious about fighting inflation.

This next chart, courtesy of, shows 50% of people think rates will remain at 2.00% through September and over 25% think rates will be higher.

This greater than 75% expectation that the Fed will not cut interest rates further has given the dollar reason to stop falling. For oil to continue to rally exponentially means it is doing so without the aid of a falling dollar.

Note: I am only saying what the charts show as major resistance and support levels. I am not predicting these prices!

Kirk Lindstrom's Investment Letter Performance

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