The West Texas Intermediate Crude Oil market has broken down significantly during the trading session on Wednesday as the $85 level has been shattered. This was an area that had offered quite a bit of support previously, so it should not be a huge surprise that breaking through there is a very strong signal of just how negative this market is now.
Furthermore, you need to keep in mind that we are closing at the very bottom of the candlestick, which will signal that perhaps there are quite a few traders out there that are willing to get short and hold it. Because of this, it would not be overly surprising to see this market breakdown to test the $80 level. Furthermore, the 50-Day EMA is dropping to break through the 200-Day EMA, forming a so-called “death cross.” This is a market that has been breaking down for a while, and now that we have the longer-term negative signal coming out, this could lead to a massive downtrend that picks up momentum.
Selling Pressure Ahead
- Short-term rallies at this point will more likely than not be sold into at the first signs of exhaustion, as traders are starting to focus on the fact that demand will be dropping if we have the global growth slowing.
- After all, oil is highly sensitive to whether the economy is moving forward, as it is the lifeblood of the economy.
- Ultimately, it looks as if we are going to see a lot of selling pressure not only due to the lack of global growth, but the fact because the US dollar is starting to strengthen.
- Beyond that, if the Iranians can start selling in the open market again, it’s very likely that we would see oil continue to sell off yet again.
Rallies at this point will see plenty of exhaustion, especially near the $85 level that should have a certain amount of “market memory”, and of course the previous support should offer future resistance. Even if we break above there, the $90 level should come into the picture as well, as the large, round, psychologically significant number will attract a certain amount of attention. Nonetheless, this is a market that I have no interest in buying anytime soon as the chart looks so horrible.
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