Trend Line Destruction Takes Prices to Test Major Support

Prices broke through the support tend line and look like additional tests of support down to the range from $1.59-$1.51 seems to be imminent before the upcoming expiration. I find it interesting that one trading house limited all trade associated with the June contract to closing positions. The only time I have seen this type of limiting event happen was on the close of the May Crude contract. Not sure what this means, but there is clearly concern for the potential of volatility. Speculative shorts on the break below trend support allowed for additional positions as they add an additional 36,000 contracts expecting lower prices during the summer. This analysis has supported from the narrowing in the spreads between the summer prompt and winter contracts.

Longer term analysis brings nothing to the supportive table and also suggests additional declines coming, but shows no type of breakdown potential that will break the earlier lows at $1.519. This is still a range trade environment that seems to be heading to the low side of the range. Last week’s decline occurred with gains in volume and open interest, discussed above surely suggesting additional declines coming. While the prices look bleak There is still the potential for the Q2 high to respond higher than the early May gains.