- The West Texas Intermediate Crude Oil market has rallied a bit during the trading session on Friday, as we are now above the $80 level.
- Furthermore, we are above the neckline from the inverted head and shoulders, so I think that comes into the picture as well.
- At this point, I anticipate that crude oil could go looking to the 200-Day EMA if we can break above the highs of the week.
The 200-Day EMA is close to the $86.50 level, and then the next target could be the $90 level. On the other hand, if we turn right back around to break below the 50-Day EMA, then we could go down to the $80 level, which is a large, round, psychologically significant figure. When you look at the longer-term attitude of the chart, it has been very negative, but we are starting to take a look at the possibility of a Chinese reopening, and I think a lot of traders are getting excited about that. We will have to see whether or not the rest of the world follows right along.
Market Continues to be Very Noisy
When you look at this chart, you have to keep in context that we have formed a nice little double bottom, or an inverted head and shoulders, but we also have to worry about the fact that European and American imports from China have shrunk drastically, so how much of a boost we get remains an open question. That being said, it does look like we are at least going to look at some type of short-term recovery, and that is probably well overdue at this point anyway.
If we turn around and break down below the 50-Day EMA, the $80 level will probably offer a lot of support but breaking down through that would be very negative. In fact, that would probably not only be negative for oil but we would more likely than not see a lot of negativity in other markets as well as it would be a sign of a major “risk off move.” Ultimately, this market continues to be very noisy, so make sure your position size is reasonable, and make sure you will only add to winners as you could get hammered if you are not careful trading the crude oil markets over the next several weeks.
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