The West Texas Intermediate Crude Oil market rallied a bit during the trading session on Tuesday as the uptrend line continues to make a bit of support for the market. We formed a nice-looking hammer on Monday only to turn around and continue the overall uptrend. The $70 level above is significant resistance, not only due to the fact that it is a large, round, psychologically significant figure, but also where the 50-day EMA currently sits. That being said, I think it is going to take a bit of momentum to finally break above there. We did give back the absolute top of the range later in the day, suggesting that perhaps we are still a bit concerned.
When you look at the overall situation with crude oil, there are lot of questions as whether or not there would be enough demand out there to pick up crude oil. One of the things that we will also be paying close attention to is the CPI figures on Wednesday, which will give us an idea as to whether or not inflation is starting to truly take off in America. I think there will be a lot of volatility due to that announcement, especially as people start to ponder the idea of the Federal Reserve tightening monetary policy later this year.
The uptrend line underneath offers support, but even more stringent support is going to be $65. We formed that massive hammer and have now rallied enough to fill the gap above. Now that we have done that, I think we have a bit of a squeeze in this general vicinity that will result in a big move. The market is starting to show cracks in the ice now, as we have formed a “lower high” recently but have not formed the necessary “lower low” to truly signify that we are going to break down drastically. If we break down below the $65 level, it is likely that the market could go looking towards the 200-day EMA underneath which is sitting just a bit above the $61 level. Furthermore, I think if we do break down it could be the beginning of a major change in town. On the other hand, if we break above the $70 level, then we probably would go looking towards the $73 level.
