The West Texas Intermediate Crude Oil market initially tried to rally on Wednesday but gave back gains as we continue to hear a lot of noise in the market. There are a lot of questions out there when it comes to whether or not the demand will continue to pick up, as economic indicators around various parts of the world look a bit anemic. Because of this, it’s very likely that we will have to be curious about whether or not there will be demand from certain parts.
That being said, we have seen a huge move higher, and a little bit of a pullback makes quite a bit of sense. The $120 level above has offered resistance, and now we are sitting at the top of the previous triangle. If we break down below the bottom of the candlestick from the Tuesday session, then it’s possible that we could go looking to the $110 level. After that, the 50-day EMA comes into the picture, which is close to the $107 level.
This is a market that continues to see a lot of buyers on dips, despite the fact that $120 is starting to offer a bit of selling pressure. Eventually, we will break above the $120 level, and the biggest thing that is offering resistance there is probably the psychology of the situation. As long as we stay above the 50-day EMA and the uptrend line just below it, I think this is a market that you have to look at through the prism of an uptrend. Because of this, I will not short this market based on the candlesticks of the last couple of days, but I also recognize that we are more likely than not going to evolve from here. Think of it as offering value from time to time, and it is your job to buy this market when you get an opportunity. In general, I would need to see a major shift in the supply/demand situation to think that the oil market is suddenly going to crack to the downside. In fact, it’s probably worth noting that China is starting to reopen, and that should drive up a significant amount of demand over the next several weeks. We will have to wait and see, but right now there’s nothing on the chart that tells me we are falling for any significant amount of time.
