I am joining thousands of better informed traders who trade and analyze crude price movements. Crude oil futures have a congestion zone between $120 and $124. This zone devloped in May. Any decline should find support in this zone. If Crude futures close below 120, then the support is broken, with a target of 108.
On CNBC-TV18, I have been asked to give my views on crude. I have said that crude could easily dip to 120 without changing its uptrend. After all, even the strongest of bull markets will see corrections in between.
One principle of technical analysis is that the trend is assumed to continue unless proved otherwise. Crude started an up move in year 2002 when it was trading at $20. Since then, crude prices have consistently moved up, with a number of sharp corrections in between. The recent run up to 147 probably required some kind of corrective counter move. This is what we should be seeing now.
Why should the up trend continue? A big trend such as the one in crude should end after a prolonged period of distribution. The current down move started quite suddenly. The end of the crude bull market is likely to be accompanied by months of top formation. Of course, this does not have to work out, but this is what my best guess is.