At this point, the market continues to find buyers on dips, and I think that is probably how we should trade going forward.
The West Texas Intermediate Crude Oil market rallied again on Friday to close out the week on the right foot. The $74 level is an area where we have seen a lot of selling pressure in the past, so it makes sense that we would have a little bit of trouble in this area. Short-term pullbacks at this point will continue to see a lot of buyers, as we have seen a lot of this type of action over the last couple of days.
The 50-day EMA sits underneath the $70 level, which suggests that we are going higher. The market will continue to be influenced by the 50-day EMA as it has been somewhat reliable, and the fact that it is currently curling higher suggests strength as well. That being said, we could be getting ready to form some type of uptrending channel, supported by that very same 50-day EMA.
If we were to break down below the 50-day EMA, then it is likely that the market would fall from there, perhaps reaching down towards the $67.50 level. That is an area that had been massive support previously, and it is worth paying close attention to. If we break down below there, then it is likely that the market will fall apart and go looking towards the $65 level, with the 200-day EMA reaching towards that area.
At this point, the market breaking above the $75 level looks likely, but the $75 level is going to offer a little bit of headline risk, just from a psychological standpoint. The market breaking above the $75 level opens up a bigger move, as crude oil continues to be one of the better performing markets in the world. That being said, we also have the US dollar exerting influence, and if it starts to strengthen that might be a little bit of a headwind, but keep in mind that occasionally that correlation breaks down. We have certainly seen that correlation break down as of late, so that should not be reason enough to place a trade. At this point, the market continues to find buyers on dips, and I think that is probably how we should trade going forward. Expect a lot of noisy behavior, but I still favor the upside.