If you read Mondays article you will have seen we were bullish crude oil and unleaded gasoline based upon geo political concerns and are looking for a big move up to test contract highs.

We did not get any strength on Monday, but prices have bottomed today and are moving higher. Could this see another test of the highs or will the bears take control?

Geo political reasons will keep prices firm

Forget the supply and demand situation - its geo political concerns that are the major driving force in crude and unleaded gasoline and we have an important meeting on Thursday.

The 35-nation board of the International Atomic Energy Agency is scheduled to meet in Vienna on Thursday to debate the situation.

Can there be a compromise?

The problem with the whole Iran situation is a hawkish American administration that are not be in the mood to concede much and neither will Iran.

No one wants to lose face here.

This problem is while we dont know what will exactly happen, the problem does not look like it will go away.

The technical view

The markets have been trading in a channel for several weeks now and prices have steadied at near term support.

Taking a look at unleaded gas, prices have firmed at the bottom of the Bollinger band and near term momentum is turning up, with the stochastic indicator crossing to the upside.

Resistance is at the middle of the Bollinger band, if this is hurdled the contract should test the highs.

Expect unleaded gas to lead the advance over crude.

Risk / reward

It looks like a near term bottom is being formed, if prices open strongly and remain firm a buying opportunity is presenting itself with low downside risk.

The odds favor the bulls and a test of contract highs should take place shortly. There is plenty of speculative buying waiting on the sidelines to come in and push prices higher.

Watch todays action for strength and upside momentum to carry prices higher into the close.