U.S. oil fell more than $1 on Tuesday as Britain and Iran said they were willing to use diplomacy to end a row over 15 British sailors and marines seized in the Gulf on March 23.
"We're not looking for a confrontation over this and actually the most important thing is to get people back safe and sound. And if they want to resolve this in a diplomatic way the door is open," British Prime Minister Tony Blair told a radio station in Scotland.
Investors interpreted the comments as a favorable response to apparently conciliatory remarks by Iran, the world's fourth biggest oil exporter, late on Monday.
As the daily chart shows, oil broke through resistance courtesy of the latest Mid-east diplomatic crisis. With the prospects of a peaceful settlement developing, it appears prices are falling. Now we have to see if previous resistance becomes support or not.
At the end of last week, I wrote the weekly oil market may be forming a reverse head and shoulders bottom. If that was the case, then we should expect the markets to retest support at the neckline and then rally again. If we see a break of the trendline, we'll know I was wrong.
Always remember: Technical analysis is not a science. It should be used in conjunction with fundamental analysis.
FA = What to buy
TA = When to buy.
