The West Texas Intermediate Crude Oil market rallied significantly to kick off the Tuesday session, but then gave back the gains to form a bit of an inverted hammer. If the market was to break down to make a fresh, new low it’s very likely that the WTI Crude Oil market could drop down to the $47.50 level, and then possibly the $45 level after that. The alternate scenario would be to break higher but it’s not until we break above the $52.50 level that I would be tempted to start buying this market.
Ultimately, this is a market that will continue to struggle due to the Chinese coronavirus issues in the lack of demand. There are workers trying to go back to work in China now, so that of course could be a sign that crude oil markets could pick up as far as demand are concerned. However, they are oversupplied in general, so that should continue to be a major problem as well. If the market was to break above the $52.50 level, then it could go as high as $54, followed by the $55 level after that. All things being equal though, this certainly looks like a market that will continue to struggle as far as buying is concerned, and ultimately this is a scenario where sellers will more than likely continue to jump in and push this market lower every time it tries to rally.
That being said, the market is trying to close above the $50 level, so if it does do that it’s likely that the market will continue to at least fight. There are some suggesting that perhaps oil is oversold, it is difficult to argue with that based upon the price action, but again, I don’t feel that you can be a buyer until we break above the $52.50 level, something that’s going to take a significant amount of momentum, something that this market has lacked as far as the bullish side is concerned.