The West Texas Intermediate Crude Oil market gapped a little bit lower to kick off the trading session on Tuesday, as crude oil continues to struggle. The downtrend line that is marked on the chart suggests that we certainly have a lot of selling pressure, and we continue to make “lower highs” so far. However, I think the nice thing about this market is that it has clearly shown itself to have a couple of areas worth paying attention to, thereby giving you an opportunity to get into the market as it shows you which direction it wants to go.
The most obvious area would be breaking above the highs of the previous couple of candlesticks, as it would be a clearance of the downtrend line and of course the $70 level. Getting above there certainly allows the market to go looking towards the $74 level, as it would be a continuation of the bullish pressure. This would assume that there is a lot of faith in the reopening trade, which of course the crude oil is one of the easiest ways to play. The market has fallen quite a bit and therefore one would think that if we break higher than it is likely that we could continue the longer-term trend. However, that also suggests that the economy is going to suddenly take off.
To the downside, if the market were to break down below the $67.50 level, then I think it opens up the possibility of a move down to the $65 level. After that, then the market goes looking towards the 200 day EMA underneath, which is currently sitting at the $62.23 level. If we were to break down below there, then obviously it would be an extension of what had been relatively negative. We are in a down trending channel, and therefore you need to pay close attention to that. Nonetheless, the market is likely to continue seeing dollar pressure until proven otherwise, but a breakout to the upside could spring a bit of momentum into the market. The 50 day EMA is an indicator that a lot of people pay close attention to, but this is sideways action and therefore the 50 day EMA going sideways makes quite a bit of sense. Let the market tell you which direction wants to go before putting money to work.
