Technical Analyst Sees Oil Rallying to $88 per Barrel

Posted Mar 18th 2010 10:10AM by Connie Madon
Filed under: Analyst Reports, Forecasts, Technical Analysis, Oil

Gordon Manning, technical analyst at National Australia Bank Ltd, foresees oil rallying to $88 per barrel.

Technical traders use support and resistance chart points to plot their trades. Resistance is an upside barrier that must be penetrated for prices to go higher. Support is a base line that must be breached for prices to go lower. Each day trader uses various formulas to calculate support and resistance for that day. Chartists do the same but for longer periods.

If you watched the price action of oil futures you noticed that prices are fluctuating between $80 and $83 per barrel. The first line of resistance then is at $83. If prices moved upward, through $83, then traders will look for the next level of resistance. In this case Manning sees that as the $88 level.

The $88 level is significant because it is halfway between the top level of $147 reached in 2008, and $33 a barrel -- the lower level oil reached soon after. Fifty percent retracements are important psychological points. In the stock market, a 50% retracement in the Dow was 10,250, halfway between 14,100 and 6,400. When that level was breached, notice that prices have been slowly moving higher.

On a fundamental basis, OPEC left oil quotas unchanged. This is putting added pressure for higher prices.

Tags: gordon manning, inthenews, oil, technical analysis