During the session on Monday, the WTI Crude Oil markets fell significantly. However, we did find enough bullish pressure underneath to turn things back around and bounce. Because of this, we ended up forming a hammer which of course is one of the more bullish candlesticks that you can get. The candlestick leads me to believe that we will get a bit of a rally from here, but quite frankly I’m not interested in that rally and recognize it as a potential selling opportunity.
After all, this is a market that has been falling apart quite drastically, and as a result I think that a “dead cat bounce” is needed. Markets cannot go in one direction forever, and at one point or another simple selling exhaustion will step in and cause the trend to reverse for a wild.
US Dollar
On top of that, the US dollar has been taking a bit of a break from the rally, so there are a couple of reasons the think that perhaps the oil markets are going to continue to rally for the short-term. I see significant resistance above anyway, so I’m simply going to stand on the sidelines and wait for the $38 level to offer enough resistance to form a fairly exhaustive candle. Once we get that, I will not hesitate to start shorting.
We could possibly break down below the bottom of the candle for the Monday session first, and that of course would be a very negative sign as well. Either way, I don’t see how this market rallies from here for any real length of time, and I now have the $40 level as the essential “ceiling” in this market. To break above there would be somewhat significant and impressive, but I just don’t see it happening anytime soon. Also, you have to keep in mind that part of this bounce would’ve been predicated by the simple fact that we were at the $35 level, a large, round, psychologically significant number.
