The West Texas Crude Intermediate Oil market has initially tried to rally during the trading session on Tuesday but then collapsed back into the $50 level again. This is a market that looks as if it is ready to break down rather significantly, and therefore it’s difficult to imagine a scenario where you would be a buyer. At this point in time, the crude oil market has been slammed, and it’s difficult to imagine a scenario where people are going to be comfortable enough buying.
Coronavirus fears continue to be a major issue, as the slowdown in China should continue. Furthermore, the South Korea outbreak has people worried about semiconductors as well, which is a major part of the global economy. Because of this, the demand for crude oil is going to drop. Furthermore, we have a ton of oversupply out there and therefore it’s difficult to imagine a scenario where markets rally quickly. I believe that we are looking at a scenario where rallies are to be sold off every time they happen, and signs of exhaustion are to be the trigger point. It’s not until we break above the 50 day EMA that I would be interested in buying this market, but I don’t think that happens anytime soon. There is nothing on this chart that looks healthy, and it does appear that we are most certainly going to try to break down again. If you squint, you can make an argument for some type of bearish flag.
At this point in time, is very likely that we will continue to see a lot of noise in this market, especially when it comes down to headlines coming out of the coronavirus issue. Because of this, it’s very likely that what we are getting ready to see is a market sell off every time we get close to any strength. If we do break down below the $49 level, it’s very likely that we go looking towards the $47.50 level, and then eventually the $45 level. Again, it’s not until we break out and above the 50 day EMA that I would be a buyer, and I don’t see that happening anytime soon. Oil is in a world of hurt right now and will continue to be so for the foreseeable future. If we did break out to the upside, it would almost certainly have something to do with the coronavirus situation getting better.
