Crude oil futures for June delivery on the New York Mercantile Exchange were sharply higher in late-morning dealings Wednesday, pushing above $111.00 a barrel. The market got a fundamental boost Wednesday from a bullish weekly DOE storage report that showed an unexpected draw in crude oil stocks. From a technical perspective, the crude oil market bulls have regained fresh upside near-term technical momentum this week, following strong selling pressure that occurred early last week and produced some temporary near-term chart damage. Price action early last week scored a bearish “key reversal” down on the daily bar chart, which is an early technical clue that a near-term market top is in place. However, the strong gains seen on Wednesday are working to render moot last week’s negative technical price action.
The next upside technical price target for the rejuvenated crude oil market bulls is producing a close in June futures above last week’s 2.5-year high of $114.05 a barrel. Such would then open the door to a challenge of strong psychological resistance at $120.00 a barrel. The crude oil market bulls would lose technical power to also suggest a near-term market top is in place if prices would fall and close below strong chart support at last week’s low of $105.98 in nearby June futures. Stay tuned!–Jim Wyckoff