The WTI Crude Oil markets initially tried to rally during the course of the day on Monday, but turned back around to form a shooting star. That being the case, we are sitting right on top of support and that of course is a very bearish sign. I also recognize that the $50 level is without a doubt a large, round, psychologically significant number, and as a result it should attract a lot of trading. However, if we break down below there I would become a seller of this market as I think the next support level is at the $47.50 handle.
If we can break down below there, the market should then head towards the $45 level, which is the next large, round, psychologically significant number. I think there is support there as well, so really this point in time I think that the market will move in $5 increments, as the crude oil markets tend to move in a very technical increments.
Selling a breakdown
I’m selling a breakdown in this market if we can close below $50 on the daily chart, and have no interest whatsoever in buying this market as I recognize that there is probably resistance all the way to the $53 handle. That has been consolidation for some time, and I think that short-term traders will continue to bounce back and forth between $50 on the bottom and $53 on the top, so having said that, I think that short-term traders will be attractive this area but quite frankly I would like to see a more significant move in order to get involved in this market.
As long as the US dollar continues to rise, it makes more sense for this market to break down. Ultimately, I think that’s probably what’s going to happen, and as a result I suspect that I will be short of this market fairly soon. I’m not calling for a massive break down, just a move lower from here as demand is simply far too soft.
