Oil ready to bounce up?

Here we see a fairly long term chart for USO, the ETF which tracks crude oil prices. These days, the spot price of barrel of oil = 1.236 * (Price of USO).

Oil took off like a rocket this year, and built upon last years big gains too. But it hit its peak around $145 in July, nd strted falling as the general market recovered. The reason for the big dip and big fall is the subject of much debate. Some say real world demnd from developing countries. Other's say pure speculative bubble. Either way, one only really needs to consider price to understand what's going on.

Consider the big rise since Jan 2006. If we set a fibonacci range from this low to the July 2008 highs, we see some intermediate corrections landing in or around the key 38, 50, and 62% support levels. But perhaps most interesting is the situation right now. Based on this range of movement, we have retraced 38%, and from the looks of it, found some soft support and flattening right at this line. But we re also looking at intersection with the uptrending 200 day moving average around USO=88. This is strong combination of medium to long term technical support levels. We could very well find some support here, and any strength in USO which appears to break out of the channel it has declined within for the past 6 weeks could be considered a bullish oil opportunity.

On the other hand, continuing through this big retrace level and the 200 day moving average says there aren't enough bulls to keep it floating, and more precipitous decline is likely. But you can bet that $100/barrel isn't going to be an easy line for it to break if it keeps dropping. This is more or less at the 50% retrace level, and then $89/barrel is roughly the 62% retrace line. These would be good price targets to keep in mind if playing the downside.