WTI Crude Oil Forecast: Market Looks Bullish Overall

Christopher Lewis

A short-term pullback is probably going to end up being a buying opportunity. 

The West Texas Intermediate Crude Oil market pulled back slightly during the trading session on Tuesday but then found buyers underneath to show signs of strength. The $65 level is a bit of a large, round, psychologically significant figure and as a result it does attract momentum. We are in an uptrend and I have no need to fight it at the moment, even though I do think that longer term we will see a massive sell-off. The market looks as if it is trying to simply build up enough momentum to continue going higher, based upon the idea of the reflation trade.

Underneath, we have a nice uptrend line that has been relatively reliable, which currently coincides with roughly $63. I think at this point we will stay above there, so a short-term pullback is probably going to end up being a buying opportunity. Although not directly affecting the market, the US dollar could get a bit of a move late in the day due to the FOMC statement and the press conference afterwards, so if we do see a huge spike in the US dollar that could drive down the crude oil market.

To the upside, I think that the market will eventually go looking towards the $70 level, but we need to get beyond the $67.50 level initially, which has been rather resistive. If we can break above there, I think the $70 level is all but a given. To the downside, if we were to break down below the $60 level, we could break down rather significantly, but I think at that point it would probably involve something to the effect of a massive build in inventory or perhaps a spike in the US dollar, or even both. I think this is a “one-way trade” for most traders, so it is going to take a major shift in psychology to break this market down.

This is a market that I think is going to be noisy for the next few days, as we will use the $65 level as a magnet for price. In the short term, I think a lot of people are going to use range-bound trading systems on short-term charts to take advantage of the choppy behavior.

Crude Oil

Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.

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