More likely than not though, I think we probably have sideways action overall, and therefore I think short-term traders will continue to be attracted to this market.
The West Intermediate Crude Oil market has initially tried to rally during the trading session on Wednesday but gave back gains above the $85 level. Ultimately, this is a market that continues to see a lot of noisy behavior, but I think there is a lot of pressure since the global economy is almost certainly going to slow down.
The $82.50 level underneath offers a significant amount of short-term support, but I do think that it is probably going to get broken, and that we may drop down to the $80 level. The $80 level is a decent round figure that a lot of people will pay attention to. Rallies continue to get sold into, and we have already had the so-called “death cross.” Because of this, longer-term traders are starting to look at this through the prism of a downtrend, and I think it is probably only a matter of time before we break down completely.
Expecting Sideways Action
- Keep in mind that the Federal Reserve is going to slow down the economy as well, so this is a bit of a “double whammy” for crude oil, and anything close to being a risk asset.
- If we break down below the $80 level, then I think it’s likely that the bottom could fall out.
- More likely than not though, I think we probably have sideways action overall, and therefore I think short-term traders will continue to be attracted to this market.
If we were to turn around a break above the $90 level, that could offer more buying pressure because it would be such a huge breakout and of course a move of significant momentum. If we can break above the $90 level, then it’s likely that the momentum could carry this market to the $95 level. I don’t expect that, but you never know what could happen next because there has been so much volatility. After all, this is a market that is highly volatile most of the time, as it is the lifeblood of economic growth. You need to be cautious with your position sizing because this is a market that can move quite rapidly on news headlines. Ultimately, I’m looking to fade rallies or sell breakdowns, but I must keep an open mind.