The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( TheLFB-Forex) -- The last West Texas Intermediate (98.75) four-hour chart signal was generated Jul 13, with a break above 97.80 that targeted 99.10, which has completed its cycle. A near-term signal was generated on July 12, with a break higher from 97.00 that targeted 97.50.

WTI is trading in the lower half of a trading channel created in May and June that has 104.50 as upside resistance and 89.50 as downside support. The 97.50 price point is the technical area that has drawn in the most momentum over the last two months, and has created volatility again this week.

Potential for new trade signals to form is weak, after intraday moves bounced off the 200-day SMA area at 93.00 and hit resistance at 98.50 which is the 50-day SMA area. The previous reversal through resistance at 100.00 on WTI has created an upper barrier that will be very hard to break in one session. Now is not the time to be holding WTI positions for the long term as valuations look lost.

Headlines: News wires are very quiet regarding crude oil valuations, but this is a week of important economic releases that will set valuations for July.

Where to Now:
  • Crude oil is in a very mixed trading cycle that will not move any of the mid-term neutral trends until a weekly chart can close above 101.50 or below 89.50.
  • Downside targets may include another test of 93.00 if S&P 500 equity trade closes a weekly chart below 1295, which could pressure regional growth, and subsequently oil, valuations.
  • Expect upside tests of 99.00 resistance to fail if increased buying volume does not hit the overall market soon.
  • Low-volume ramps higher are creating subsequent price action weakness when participation levels increase on the down days, which is creating massive intraday volatility.
  • This review of technical sentiment is signaling to sell WTI at the previous day's high, and buy at the previous day's low with very tight targets.

    WTI Correlations: WTI has a 36-month 75% correlation to S&P moves, and a 90% correlation to the euro (EUR-USD) currency pair. Daily trading range on WTI is $2.50, which is below the historical norm and indicates decreasing speculative interest, and increased volatility as support and resistance areas are tested. WTI 200-day Simple Moving Average is at 93.10.

    Previous Signals: The second quarter of 2011 generated seven crude oil trade signals issued to clients, six of which completed and covered over 4.20 dollars of net movement at Target 1 areas, and 8.40 dollars of net movement at Target 2 areas. The misses came on days that instant volatility hit the global markets in reaction to breaking news headlines. Most signals have been generated from one-hour chart algorithms.

    United States Oil Fund ( USO) Outlook: The outlook for USO (38.30), the exchange traded fund that tracks oil momentum, is for consolidation above 36.50, and to struggle to break 39.90 resistance. The ETF is likely to continue to lag behind the main moves seen in WTI futures contract trade, as major oil price action is taking place while the U.S. session is closed.

    USO is in a mixed trend across most timeframes, and has developed a lot of price gaps at the Wall Street open. No long signals will form until a weekly chart can close above 39.50. No short signals will form until a weekly chart can close below 36.50. The weekly chart close may offer some long-term clarity.

    There is a near-term signal to short USO from 37.05, but that will likely only test support at 36.90 before reversing.

    WTI Technical Section:

  • WTI is trading at the top of a price channel between 90.00 and 99.00 which was formed in June
  • This area is the bottom of a price channel (now resistance) between 96.50 and 103.00 which was formed in May and June
  • The 200-day SMA area at 93.50 will create a solid base for long momentum to build from technically, if global fundamentals align and create oil buying sentiment
  • The 50-day SMA at 98.50 and 100-day SMA at 100.50 will be major resistance areas that will not be easily broken in one session
  • No mid-term long signals will form on WTI until a Weekly chart closes above 100.50. No mid-term short signals will form until a weekly chart closes below 88.50
  • ABC Potential: Choppy and overlapping chart patterns are caught in a two-month trading range with no clear technical signals.

    This Week's Call to Action: Near-term intraday signals are all that WTI is offering. Buy tests of support and sell tests of resistance at the previous 24-hour session lows and highs. These charts show that fair value has been found on WTI.

    Alternate 24-Hour Trade: Investors who do not want to wait for their regional cash market to open to track the above moves, or do not have 24-hour access to the market they have open positions in, are able to access the 24-hour currency market. There is potential to analyze and trade currencies in a high-volume market that is supported by the global inter-bank system.

    Investors can trade currencies in line with a rising global market, or trade ahead of a falling cash market open. Being able to use currencies offers the opportunity to be in a trade before the regional market opens.

    Traders could trade the currency pair EUR-USD in line with the potential seen in global equity movement. Buying the U.S. dollar and selling the euro on days of major commodity weakness is a simple process of placing a sell order on EUR-USD. That same position can then be managed in a similar way that equity trades would be bought and sold.

    Detail of alternative Forex trade will be sent directly to clients once this week's Federal Reserve and Earnings Season headlines are absorbed.

    TheLFB is great for all skill levels. Receive market support, and get TheLFB trader advantage. Sign up today!
    Marco Hague is one of the founders and principals of The London Forex Broadsheet (commonly known as TheLFB), a global forex trader portal with headquarters in the U.S. Hague began his career with the Bank of England dealing with foreign exchange control, and he has been trading for the last three decades. He has been involved with institutional risk asset ratio analysis and the implementation and maintenance of institutional trade desks globally.

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