Oil Set to Rise to $75 After Filling ‘Gap’: Technical Analysis

(Bloomberg) -- Crude oil will rise toward $75 a barrel after the market filled a price gap that stood as technical resistance for three weeks, according to the head of Schork Group Inc. Oil last week closed a gap between the low of July 2 and the high of July 6 on its way to a 7.1 percent rally, the biggest weekly gain since May. Having broken through resistance, the market’s rebound over the past two weeks can be sustained, said Stephen Schork, president of the Villanova, Pennsylvania- based consultant. He correctly identified the gap July 8. “With last week’s closure of the ‘gap,’ the path to $75 appears wide open,” Schork said in e-mailed comments. “We had our ‘correction’ toward the low $60s/high $50s and the bulls held serve.”

Oil touched $68.69 a barrel yesterday, the highest in more than three weeks, as equity markets rose and the dollar declined. Futures have climbed 53 percent this year on speculation global demand for fuels would recover with the economy. The contract for September delivery on the New York Mercantile Exchange traded at $68.11 a barrel at 8:25 a.m. in Singapore. The market’s current uptrend can be traced back to July 13, when prices dipped to $58.32 a barrel, the lowest in eight weeks. There was pessimism at the time over the outlook for oil demand, after U.S. consumer confidence fell and fuel stockpiles in the country rose.“We are now on the rebound,” Schork said. “The market has a funny way of gravitating toward nice round numbers, like $75.”

If oil stays within its ascending channel on the daily continuation chart, it may approach the June 30 high of $73.38 a barrel by the middle of next week and $75 as early as Aug. 10. Prices last traded at $75 on Oct. 21 last year.“Now that we held support on the way down, it is up to the bears to defend the rebound,” he said. “Quite frankly, we do not think they are up to the task.”