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Short

Lower low is signaling bulls are in trouble

NYMEX:CL1!   Light Crude Oil Futures
While the supply disruption caused by Iranian/Venezuelan sanctions and Lybian civil war were the main drivers of the rally at the beginning of the year it seems that the fundamentals are changing. In a few weeks from now the OPEC members are deciding whether the agreement limiting production will be extended. Although Saudi Arabia has an interest to keep prices higher but the smaller producers on the other hand need dollars to support their economies. Even if they would agree on the extention however the main concern is that Russia seems not willing to join but the whole theatre is a poker game. To this equation you can add also the US interest to bring down petrol prices before the elections next year so they will pump as much oil as they can...

Nevertheless if we look at the chart a lower low at the botom of a support zone is signaling more headwinds for the bulls. I see as a good short entry if the market will retest $64 with a targets $60 in mid May and $56 mid June. However there are too many factors that can change this view and therefore a stop is a must (here I'm thinking about two possible levels, 65.2 or 66.7) or an even better option is to play it with put bear spread with strikes 62-57.
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