The West Texas Intermediate Crude Oil market rallied rather significantly on Friday to put the $90 level in the rearview mirror. Because of this, it looks as if the market is ready to continue going much higher, perhaps reaching towards the $95 level. Short-term pullbacks will continue to find plenty of buying opportunities near the $90 level, and perhaps even lower than that. Other potential candidates for support would be the $87.50 level, the $85 level, and then the 50 day EMA.
On the other hand, if we turn around and break out above the top of the candlestick for the trading session on Friday, that would be an extraordinarily bullish sign and could send this market even more to the upside in a parabolic altitude. I do not necessarily expect that to happen in the short term, but it will be interesting to see if it does. If it does in fact do that, then I think we will get very parabolic and maybe stretch ourselves out a little bit too far. In fact, you can see that late in the day we did give back some of the gains as traders collected profits. Nothing can go straight up in the air forever, not even oil.
Going forward, this is a game of buying dips in order to find value that you can take advantage of, and as a result, I think the $90 level will continue to be crucial. There is a certain amount of psychology to that number, and I do think that it will be a very interesting place to pick up a little bit of oil. I would try to trade as small as possible and add as the trade works out in your favor on the intraday charts. That being said, if we were to break down below the 50 day EMA, something that we will not see happen anytime soon, then I could be short of this market. With OPEC having a lot of trouble meeting quotas, I just do not see a scenario in which this will happen soon. The US dollar could strengthen and slow the descent down a bit, but that is about as bearish as I think you can possibly get at this point in time.
