Quick Take: Crude Oil Ready to Breakout?

By Andrew Nyquist
As much of the world continues to focus on Greece and the European debt crisis, tensions in the Middle East continue to boil. With much of Syria embattled in civil strife and Israel/Iran readying for a showdown, the region is once again brimming with uncertainty and volatility. And when the Middle East begins to to stir, crude oil tends to perk up. Case in point, the chart below, showing crude up 10% this month alone.

But more importantly, crude oil is toying with a possible breakout from a 10 month inverse head and shoulders formation that would project to 130-135. Although $130 oil may not be today’s business, higher oil prices may be a tell as to the level of concern about Middle East tensions and possible disruptions to the oil markets this spring, especially if the ever important Straits of Hormuz are disrupted or shut down for any period of time. So, it goes without saying that it’s probably a good idea for market participants to keep an eye on crude oil.

Note that the daily chart (below) recorded a DeMark sell setup on Monday which may keep crude at bay the next couple of days. Watch 102-103 level. Note as well that any break higher will require additional follow through (as confirmation).

It’s probably too early to tell how higher oil prices would affect the S&P 500 and other equity markets. Possibly not much at all… that is, unless a larger conflict emerges.

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No positions in any of the securities mentioned at time of publication.

Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of his employer or any other person or entity.