- The West Texas Intermediate Crude Oil market has fallen rather hard during the trading session on Monday but then turned around to show signs of life.
- The market ended up forming a bit of a hammer, and the hammer sits just above the $90 level.
- The downtrend line just above is part of a “falling wedge”, and therefore breaking above there could kick off a move to the upside.
If we were to break out to the upside, it’s likely that we will test the 200 Day EMA, which is the blue line on the chart, which is also being tested by the 50 Day EMA as we are slowly lower. At this point, I think that might be your first target, but I also recognize that scenario that could cause quite a bit of trouble. Signs of exhaustion in that area could be jumped on, but if we break above it, then one would have to assume that the market is going to go looking to the $100 level.
Demand causes concern
If we break down below the bottom of the hammer from the candlestick on Monday, then it should open up quite a bit of fresh selling, perhaps sending this market down to the $80 level after we break through the $85 level. Keep in mind that a lot of people are worried about the potential slow down globally, which of course would have a lot of negativity attached to the oil market as demand should drop. More likely than not, that will probably be an ongoing theme in this market, as signs of exhaustion will almost certainly be jumped on. If we do get those signs of exhaustion, it’s likely that the market then will jump on it and start shorting again.
If we were to break above the $100 level, then it’s likely that the market could change its overall attitude, perhaps opening up a move to the $110 level. I don’t expect to see that, but it is something worth paying close attention to, and therefore it’s something to keep in the back of your mind. All things being equal, this is a market that I think will continue to see more noise than anything else, but clearly, there is a serious concern out there when it comes to the overall demand. Short-term breakouts might lead to longer-term selloffs.
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