Within the last 24 hours many people have become aware of the technical situation in oil.

Paban over at Hedgopia notes CoT large speculators are the longest they’ve EVER been.  You saw what happened the last time we were at these levels in 2014.  Obviously we’re looking for breakdowns and high risk-reward shorts.

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My friend Evan Mederios wrote on the Oil breakdown and I wholeheartedly agree with what he sees.  Here’s the gist

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I think he’s spot on.  It’s just a matter of how it shakes out.

One thing I would add is Oil is trading at the rising 50 day moving average in the futures.  Even in weak markets, some buyers will try to show up somewhere for a day or two.

Now today, we’ve gotten some oil inventory data and a subsequent short squeeze.  Most people might not know that every week, oil is squeezing shorts after bearish inventory data.  The data is just getting more bearish every week.

I’m of the opinion that today’s squeeze is just a shake out within a larger breakdown.  I have no idea how long or far this pop can last, but we know above 54-55 we are DEFINITELY wrong.

I think it’s really important, when we have a technical situation like this, to remember to stick with it.  Don’t be deterred by this weak squeeze or a subsequent rally into further resistance.  The further the rally, the better our risk-reward.

Trade ’em well!