The West Texas Intermediate Crude Oil market gapped higher on Friday, and then shot towards the $80 in order to test a large, round, psychologically significant barrier. At this point, the market looks as if it is going to slice through the $80 level rather soon. Short-term pullbacks should continue to offer plenty of supportive action that you can take advantage of, because we still have to worry about the overall supply of crude oil. In fact, the overall “narrative” continues to be that crude oil should go looking towards the $90 level, and we are now starting to even see estimates of $100 per barrel.
The $75 level underneath is an area that has shown significant importance recently, as we fell all the way down to that area only to turn around and show signs of life again. Beyond that, the $75 level previously had been a significant resistance barrier and previous high, so market memory should come back into the region. On the other hand, it is a simple round figure that a lot of people would pay attention to anyway.
If we break down below the bottom of the hammer during the session on Thursday, that could lead this market to much lower levels, perhaps down to the 50-day EMA which currently resides at the $72.20 level. The 50-day EMA is rising at this point, so that does suggest that we will continue to see momentum working in our favor to the upside. This is a market that continues to see quite a bit of volatility and demand come into the picture as crude oil is not only looked at as necessary for driving and transportation, but now if we get a cold winter, it is very likely that the lack of coal at a lot of powerplants will have them switching over to petroleum as well.
We have been in an uptrend for quite some time, but I think you need to see value in order to put money to work unless we get some type of daily close above the $80 level. If we can break above the area, then I think it becomes more of a “buy-and-hold situation. That being said, we may simply consolidate between $75 and $80 in the short term, but it certainly looks as if we still have plenty of momentum. Regardless, I have no interest in shorting.
