I think any time we get a pullback of a couple of dollars, there will be plenty of people willing to jump in and then take advantage of “cheap crude.”
The West Texas Intermediate Crude Oil market rallied a bit on Monday, but as you can see, we have pulled back enough to form shooting star. The shooting star is a negative turn of events and could cause this market to pull back. As you can see on the chart, I have added the Fibonacci retracement tool, and the 38.2% Fibonacci retracement level is near the $75.50 level. A pullback to that area would be an excellent opportunity to pick up a bit of value, due to the fact that the area was the recent high where the market has shown resistance. The “market memory” that should show up at this area is something that you should pay close attention to, assuming that we can even get down there.
The 50-day EMA is reaching towards the same area as well, and I think that will only add more precedence to the idea of it being an area to buy. That being said, I do not have any real interest in trying to short this market to go down towards the area, so I think at this point it is likely that the market will eventually find some type of stability that we would look for. I am more than willing to buy this market on those dips that show signs of stability, due to the fact that there is a large fundamental reason for crude oil to continue going higher. There is a serious lack of demand, and I think what we are looking at is a market that will eventually find a reason to go higher one way or another.
One of the biggest problems that the market has right now is that it simply got to this level too quickly. I think any time we get a pullback of a couple of dollars, there will be plenty of people willing to jump in and then take advantage of “cheap crude.” After all, nothing has changed from a fundamental standpoint, so I think it is probably only a matter of time before the buyers come in. If we were to turn around and break above the $85 level, then it would be a parabolic move waiting to take off and go much higher.