The Crude oil markets displayed a degree of stability during Tuesday's trading session as the world kept a watchful eye on the unfolding situation in the Middle East.
In the West Texas Intermediate Crude Oil market, trading on Tuesday appeared somewhat choppy, with prices hovering just above the 50-Day Exponential Moving Average. The market seems to be engaged in a delicate balancing act, assessing whether the tensions between Israel and Hamas will escalate into a more significant conflict. Given that the Middle East holds a significant share of global oil production, caution is paramount. This is especially true as there is no real way to know what happens next, and any trade based on what you “think will happen” is a gamble at best currently.
The 200-day EMA is a key indicator that garners considerable attention from market participants. It stands ready to provide support should prices dip lower. However, such a scenario does not seem imminent, and we are more likely to witness continued volatility. Ultimately, buyers are expected to seize opportunities during short-term pullbacks, propelling the market toward the $90 level.
The Brent market experienced back-and-forth movement, just above the 50-day EMA. Robust support is evident beneath current levels, and any pullback could potentially serve as an attractive buying opportunity, allowing investors to secure "cheap oil." While the Israeli-Hamas conflict may have initially triggered the upward momentum, it's worth noting that we were already in proximity to the 200-Day EMA at the close of last Friday, showing early signs of strength.
Avoid Shorting the Market
- Looking ahead, the prevailing sentiment suggests a "buy on the dips" strategy as we potentially target the $95 level. Should we see a breakdown below the session's low from Friday, there could be room for a deeper correction.
- However, recent market activity indicates that bullish sentiment may reemerge, given that the market has become somewhat overextended.
To summarize, the Crude oil markets continue to navigate the uncertain terrain shaped by events in the Middle East. While tension and unpredictability persist, the prevailing sentiment leans toward buyers seizing opportunities during price retracements. With the global oil landscape at the forefront of market concerns, these dynamics are expected to continue influencing crude oil prices. As things stand, there is little inclination to engage in short selling in this market.
Potential signal: I am a buyer of crude. Period, full stop. However, I am getting involved in the markets tactically. On every drop of over 50 cents, I am buying a small amount, building up over time. I believe the market is going to $95 in WTI grade. I am not interested in selling.
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