- The West Texas Intermediate Crude Oil market had a very strong showing on Wednesday, breaking above the 50-Day EMA and the $88 level.
- This market had been doing almost nothing for a while, and even just yesterday I suggested that perhaps you are going to have to wait for some sign of life.
- It looks like we may have finally gotten that move, at least preliminarily.
Today's WTI Crude Oil Breakout Scenario
If we can break above the high of the day, one would think that we probably go looking toward the 200-Day EMA, currently sitting right around the $92 level. Keep in mind that oil is influenced by a lot of external markets, not the least of which will be the US dollar. The US dollar got pummeled during the day and therefore it’s likely that we will possibly see oil benefit from it. The Bank of Canada decided to raise interest rates just 50 basis points instead of 75, so we now have a scenario where traders are betting that the Federal Reserve is going to follow suit. If that’s going to be the case, then it’s possible that traders will treat this as a stimulative effect, which of course is good for oil.
On the other side of the equation is the fact that the global economy is slowing down. It really doesn’t matter what the central banks do, that is something that everybody already knows. If that were to continue, that would obviously be very negative for oil demand, and that’s part of what we have been pricing in so far. I think that given enough time we will have to make a little bit more of an informed decision, but the initial knee-jerk reaction is almost certainly positive at this point. Whether or not that continues is a completely open question but right now it certainly looks like the buyers are starting to push higher. Pullbacks should be well supported all the way down to at least the $85 level, so until we break down below there I think you probably have more people interested in going long than shorting. As long as that’s going to be the case, it’s possible that we could see this market continued to squeeze higher in the short term. Whether or not it can hang on to this gain is completely up in the air.
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