Crude could get to $74 this year, but not before a pullback, says the trader who called the rally

He called crude oil’s comeback. Now Scott Redler of says crude could rise 22 percent more this year.

“If everything goes right, perhaps we could see $74 this year,” Redler told CNBC’s “Futures Now.”

But, after a strong rally to start the year, the commodity could first be in for a pullback. WTI was trading at $63.47 a barrel on Wednesday, down 26 cents.

“At this particular point I think you should be selling some of your crude,” Redler said Tuesday. “We’re into resistance, and I think this is a spot to reduce versus start a fresh position.”

Crude has been on fire over the past month. Since the beginning of the year, it has risen more than 6 percent. Since mid-December, crude has seen double those gains. WTI rose to $64.89 on Tuesday, the highest since December 2014.

Redler predicted moves like these. In October, he said a dip in crude would prove temporary and that recovering prices would continue. His bullish case through the end of 2017 was tied to a “descending trend line” and base support that could push crude oil to rally to $64 a barrel.

The energy sector followed crude oil prices higher in 2018 and has topped the rest of the market as the best performer. As of Tuesday, the Energy Select Sector SPDR ETF was up 6 percent this year, stepping past the S&P 500‘s gains of just over 4 percent. The ETF sits at around $76.55 after reaching its highest level since December 2016 last week.

Redler also says now is a time to reduce a position in the energy sector until an opportunity arises to jump back in — that level for oil would be around $58 to $62 a barrel. For energy, such a moment could come once the XLE eases back to the $74 level, a roughly 3 percent decline from Tuesday levels.

Compliance among OPEC in reducing output and signs of increased global demand have supported crude prices this year. Redler sees some of the enthusiasm surrounding oil prices as overdone for the current market, though.

“Back around $45-$50 there was not a bull out there; now everyone is bullish,” he said. “Sentiment is a little bit ahead of itself.”

Crude oil pulled back slightly on Tuesday, ending 0.6 percent lower at $63.73 a barrel. That marked its third-best settlement of the year.

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