The West Texas Intermediate Crude Oil market has slammed into the previous support during the trading session on Monday, but gave back a bit of the gain as we broke above the $88 level. At this point, there is a lot of noise between here and the $90 level, so I would not be surprised at all to see this market give back some of these gains. After all, we have been in a downtrend for a while and we recently formed the so-called “death cross”, a lot of people will be paying close attention to. In this scenario, is very likely that the markets will continue to be noisy, and therefore the volatility alone might make owning oil difficult.
- If we were to break down below the bottom of the candlestick for the trading session on Monday, then I think it opens up the market to fresh selling.
- A retest of the lows that were made last week is very much in play.
- After that, you have the $80 level, which has a certain amount of psychology attached to it as you would imagine.
- Breaking below the $80 level would attract a lot of attention, and thereby could cause a huge flush lower.
Keep in mind that the US dollar lost strength during the trading session and that in and of itself might have been one of the main drivers of the market going higher. Furthermore, Russian troops have lost ground in Ukraine, but that’s not going to bring Russian oil back into the market. In other words, this was more or less just a “risk on rally” overall. I don’t think that the market has changed so much that we should be overly excited quite yet.
We would have to break above the $95 level to do serious technical damage to the selling pressure, something that I don’t see happening in the short term. Overall, I believe this is a market that will eventually find its way lower, as global demand for crude oil is almost certainly going to be dropping in a recessionary environment. With that being the case, I remain very skeptical but I do recognize that sooner or later we will have to find a bottom. I just don’t think we have found it quite yet, and there are far too many bad things that could happen between now and then.
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