Crude oil futures closed at $65.16, down by $0.87 for the day. Earlier this week, the price fell below the 100-day moving average but managed to stay above it, indicating weak bearish momentum. As the new trading week starts, sellers want to keep prices below the 100-day moving average to strengthen the downside trend. If prices drop below the swing area low of $63.61, it could boost selling momentum and increase seller confidence.

Resistance Levels

On the upside, resistance sits at $66.96, with another key point at the 200-day moving average of $67.99. These levels will challenge any potential price increases. The market currently shows indecision, with sellers unable to produce a clear breakdown. A recent report from the Energy Information Administration revealed an unexpected increase in inventory of 3.7 million barrels, highlighting ongoing supply pressure. This data supports the technical weaknesses seen in recent price movements. For traders looking for a downturn, buying put options with strike prices below the $63.61 support level could be a smart choice. This strategy will yield profits if worries about a global economic slowdown, intensified by recent data showing China’s manufacturing PMI dropping to 49.5, lead to lower oil prices. Given the current market uncertainty, this defined-risk approach makes sense.

Prepared For Upside

However, we should also be ready for possible upside surprises, especially due to geopolitical events. Historically, tensions in the Middle East or unexpected production cuts from OPEC+, like those in late 2022 that triggered a price rally, can quickly shift the trend. Therefore, buying call options with strike prices above the critical $67.99 resistance level could serve as a good hedge or speculative strategy. The market is currently coiled, suggesting that a breakout could happen, though its direction remains unclear. The CBOE Crude Oil Volatility Index (OVX) is near a relatively low 30, making option premiums reasonably priced. This creates an opportunity to set up a long strangle, which involves buying both an out-of-the-money call and put, to benefit from significant price changes in either direction. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now