The West Texas Intermediate Crude Oil market has initially rally during the trading session on Wednesday but has turned around to show signs of weakness again. By doing so, the market looks as if it is trying to break down below the $65 level. The $65 level has been rather supportive over the last couple of months, and therefore I think it is only a matter of time before there would be an attempt to push the market back to the upside. However, we are currently seeing a series a “lower highs”, which suggests that we are ready to break down.
If we do break down below the $65 level, then the market is likely to go looking towards the 200 day EMA, which sits at the $61.50 level. After that, the market would then go looking towards the $60.00 level, which of course is a large, round, psychologically significant figure, and an area that would attract a lot of attention more likely than not.
When you look at this chart, it looks as if we are forming a bit of a descending triangle, and of course we have seen the US dollar strengthened so that puts downward pressure on the market as well. If that is going to be the case, then the market will more likely than not see further downward pressure. Beyond that, the market is looking as if it is trying to top out, so that being the case it is likely that we will continue to see a bit of failure here. However, if we were to turn around a break above the 50 day EMA, then it could send the market much higher, as it would be a very bullish sign. At that juncture, I would anticipate that we can break above the $70 level and stay above there, then it is likely that we go looking towards the $74 level.
I think the only thing you can probably count on here is a lot of choppy volatility, and of course headlines moving it back and forth due to the idea of risk appetite being all over the place. After all, we are going to continue to see questions about whether or not there is going to be enough demand and global growth to support the commodity sector in general.
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