- The West Texas Intermediate Crude Oil market has rallied slightly during the trading session on Tuesday, to gain 47 basis points.
- By doing so, it looks as if it is trying to defend the $75 level and breakout of the falling wedge that it has been part of for some time.
- At this point, I think you have a situation where the market is more likely than not trying to break out of this consolidation, and it could open the possibility of a move to the $80 level.
After all, oil is oversold, so it does make a certain amount of sense that we would see a bit of a bounce. Furthermore, you need to keep in mind that the actual physical market is rather tight, so demand is going to fall due to the global recession, but the reality is that the supply is not as strong as most people think. In that scenario, I believe that the market probably has some correction ahead, which in theory could play out the entire wedge, sending this market to the $90 level. I don’t know if we go that far, but it is a possibility that you need to be aware of.
Market Can be Very Volatile During the Holidays
Furthermore, if you look at the recent price action, you can make out a short-term bullish flag, but I would not get overly excited about it, because we may just simply drift sideways as most people will be paying close attention to the holidays, not so much the oil market. The OPEC nations decided not to cut recently, so that of course has a certain effect on the market, but I think this is going to be a market that is trying to figure out whether global demand is going to continue to drift lower. We are awfully deep into the pullback from the highs, so I do think that the easy money to the downside has already been made.
Make sure that you keep your position size reasonable because the markets can be extraordinarily volatile during the holidays as we try to grasp for liquidity after headlines. On the other hand, if there are no headlines to move the market, then we probably have a market that just has nowhere to be until after January 1.
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