WTI Crude Oil Forecast: Rough Day

Christopher Lewis

I would like to see another ugly day or two, but I do not necessarily think we will.

The West Texas Intermediate Crude Oil market fell significantly on Wednesday to reach down towards the $81.50 level. This is a significant selloff, and it has formed a bit of an engulfing candlestick. If that is the case, we could see a more significant pullback to reach towards the 50-day EMA, or perhaps the $80 level. Nonetheless, this is a market that I have no interest in shorting because it does have a lot of fundamental reasons pushing it higher. Part of what we have seen during the trading session on Wednesday may have had something to do with the US dollar spiking, but at the end of the day we still have a lot of demand out there.

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Looking at this chart, you can see I still have the bullish flag drawn out, and it does suggest that we are going to go higher. In fact, the “measured move” of the bullish flag suggests that we are going to go looking towards the $100 level, which would not be a huge surprise. Obviously, we have the $85 level above that could cause a bit of resistance, but clearing that level would offer a fresh, new high, and send more money running into this market. I think this pullback has been a bit healthy, and it is something that we needed. In fact, I would like to see another ugly day or two, but I do not necessarily think we will.

The $75 level underneath would be the absolute “floor in the market”, and as long as we can stay above there, then I think you have to keep this under the labeling of a “bullish market.” In general, this is a market that I think will continue to pay close attention to the possible release of the Strategic Petroleum Reserve in the United States, but that is a short-term fix for a much bigger problem. The Biden administration has decided to shut down a lot of the production of energy, so the United States will be on the sidelines. As long as that is the case, it is difficult to imagine that crude oil markets will fall apart, unless we see some type of major shut down in the global economy, thereby stifling demand.

WTI Crude Oil

Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.

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