Two weeks ago, I wrote an article regarding the Commitment of Traders (COT) for oil. The gist of the article was that you should be leery of oil rallying once the large speculator group reaches a net long position of 250,000 contracts or more.

This past Friday’s COT report showed that large speculators have reached a net long position of 267,989. This is the biggest net long position for the group in the past year.

Oil has had a great run over the last three months, rising from $85 a barrel to over $98 a barrel, but this run has caused the commodity to become overbought on the daily and weekly charts.

With the sentiment being overly optimistic and the commodity being overbought, I look for oil to come down over the next few months.

Looking at the chart, the $80 a barrel range seems to be serving as a strong support level, as it has served as support for the last few years.

Of course a lot of whether the support holds up or not will depend upon what happens with the sentiment in the coming months. If large speculators lighten up their net long position to under 150,000 contracts, I will feel better about the support holding up.