The WTI Crude Oil markets fell during the session on Thursday, showing significant weakness during the day but remaining above the $102 level. The resulting daily candle is a shooting star, so we have to wonder whether or not this market is going to start falling. I personally believe that any pullback at this point time should be a nice buying opportunity though and that the $101 level is an area where buyers should step in. In fact, I would be more than willing to buy a supportive candle near that area, or even as low as $100 as I believe that level is a large, round, psychologically significant number as well.
The area above has a significant amount of resistance though, so even if I get a buy signal, I don’t feel that this is going to be the easiest trade to hang onto. It doesn’t mean that I wouldn’t do it, just simply that you have to keep in mind that there will be plenty of choppiness in the meantime, and it should be expected.
Consolidation normally means continuation.
When markets consolidate like this, it’s essentially the buyers taking a little bit of a breather as the market has shot straight up. Because of this, I feel that the momentum is still with the upside, and a break above the $104 level would in fact show that we are ready to go higher. Because of this, I will not hesitate to start buying this contract above the $104 level, or that pullback that I mentioned previously. It really isn’t until we get below the $100 level that I would be concerned about the bullishness, as it appears we are trying to break out of a massive “W pattern”, which of course is a very bullish sign.
Because of this, I feel that the market will target the $110 level given enough time, but that obviously won’t happen overnight. If you do not have the stomach for the volatility, remember that you can always use the options markets to express your opinions as well. In fact, it might be the best route.