The crude oil market was decimated on Wednesday as the bottom fell out of the markets. The size of the candlestick is absolutely incredible, as we opened up the day near the $125 level, but then fell all the way to the $103.66 level before bouncing again. In general, this is a market that is moving on geopolitical concerns, which makes quite a bit of noise inevitable.
Ukrainian president Zelensky has suggested that he was willing to compromise on some things, perhaps giving Vladimir Putin a way to get out of Ukraine. This of course has a bit of a knock-on effect as traders will start to focus on the idea of Russian oil perhaps coming back into the market. That being said, this was more likely than not algorithmic trading, so I would not be surprised at all to see this market turn around and rally.
With this being the case, I believe it is more likely than not going to be a situation where you need to be very cautious, and I do think that you may continue to see volatility pick up. Unfortunately, all it would take is some type of denial of the situation by Vladimir Putin or Zelensky himself to send oil straight back up in the air. Ultimately, I think this is a market that you need to be very cautious with, but it is still very much in an uptrend regardless of what we have seen over the last couple of hours.
The market will continue to see a lot of volatility going forward because we are now moving on headlines, which is a very dangerous way to trade. Ultimately, this is a market that I think will continue to grind higher based upon demand and the lack of production over the last several months, and with that being the case I think you need to make sure your position size is very small. The $100 level underneath continues to offer plenty of support for the overall trend, so even if we do crash again from here, as long as we can stay above that level I think you are best served looking for supportive candles that you can jump in based on. The fact that the market had gotten so volatile and parabolic meant something like this was inevitable.
