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The Smart Money Is Still Betting Against Crude Oil

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Oil pumps work at sunset Wednesday, Sept. 30, 2015, in the desert oil fields of Sakhir, Bahrain. Consumer prices across the 19-country eurozone fell in September for the first time in half a year as energy prices tanked, official figures showed Wednesday, in a development that's likely to ratchet up pressure on the European Central Bank to give the region more stimulus. The 0.1 percent annual decline reported by Eurostat, the EU's statistics office, was widely anticipated following the recent drop in global oil prices. (AP Photo/Hasan Jamali)

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Crude oil prices have remained relatively calm since their 25 percent late-August spike thanks to U.S. dollar weakness and reduced expectations of Fed rate hikes. As a result, many investors are wondering if the bottom is in for crude oil and energy stocks and whether it's a good time to look for bargains. Ever since warning about the oil bust in June 2014, I have also been trying to determine where the bottom is for crude oil. Despite investors' hopes, the fundamentals of the crude oil market have not changed much since the start of the year.

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From a technical standpoint, WTI crude oil is sitting under a major resistance zone from $50 to $52 per barrel that needs to be broken to give another bullish signal. If WTI crude is unable to break above that resistance zone and weakens again, $40 is the next major support level to watch. A convincing break below $40 would lead to another bearish signal.

Source: Barchart.com

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Like WTI, Brent crude oil is beneath an important resistance zone from $55 to $60 per barrel that needs to be cleared in order to give a bullish signal. If Brent proves unable to break above that resistance and heads lower, $45 is the next major support level to keep an eye on.

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Source: Barchart.com

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The longer-term WTI crude oil chart shows how important the $40 per barrel support level is...


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