The West Texas Intermediate Crude market has pulled back a bit during the trading session on Thursday, as we continue to grind back and forth in this general vicinity. The $60 level underneath has offered support, just as the $62.50 level above has offered resistance. It looks as if the market is trying to bang around in this area to form a certain amount of momentum to finally break out to the upside. If the market was to break out above the $62.50 level, then it’s very likely that we could go looking towards the $65 handle.
Breaking down below the $60 level would be very negative, perhaps sending this market down towards the 50 day EMA, perhaps even the 200 day EMA which is closer to the $57.60 level. That being said though, we have recently seen the 50 day EMA cross above the 200 day EMA, which is the so-called “golden cross.” Those are bullish signs, but at this point you should pay attention to the fact that we are in a larger consolidation area more than anything else.
If we were to break out to the upside, that would be an extraordinarily bullish sign and after the $65 level we could go looking towards the $70 level given enough time. We have seen a nice grind higher since the members of OPEC decided to cut back on production. All things being equal, the market is trying to break out of this larger range, but we also have concerns when it comes to the fact that the Americans continue to produce massive amounts of crude oil. With that being the case, it’s very likely that the market is going to hang on the economic conditions and announcements coming out of the United States and China. Beyond that, the US/China trade situation will continue to be a major driver of where this market goes, due to the fact that if the trade situation continues to strengthen, that means there will be more demand for crude oil in general. This is a way to play the US/China trade situation, as oil is very sensitive to both of those economies. With this, we have gotten a bit overextended so don’t be surprised if there is a little bit of a pullback. Nonetheless, it does look like we are trying to build up the momentum to finally go to the upside.
