WTI Crude Oil Forecast: Pulls Back From a Trendline

• The West Texas Intermediate Crude Oil market has pulled back a bit during the trading session on Monday and what would have been relatively thin action.
• After all, it was Martin Luther King Jr. Day in the United States, meaning that a lot of the big players were not involved in the market and of course the futures markets closed a bit early.
• I do think at this point we are asking serious questions of the trend, and you can even make an argument that perhaps we are trying to form an inverted head and shoulders.

If we break above the $81.50 level, then I’m going to go ahead and start buying. Can I guarantee this will work? Of course not, but I think a rally to at least the 200-Day EMA is quite reasonable. Whether or not we have seen the bottom in crude oil is a completely different question, but it is one worth asking.

I’m Going to Follow the Price Action

Alternatively, if we wipe out the candlesticks from the last couple of days, then it’s likely that we go down to the $75 level, an area that a lot of people will be paying close attention to. There is a lot of concern out there about global demand, which makes a certain amount of sense considering that export numbers coming out of China are abysmal. This is not just a one off either, both the European Union and the United States both have massive drops in imports from China. Furthermore, Chinese consumption itself has fallen quite drastically, so it stands to reason that there will be a lot less fuel burned for transport.

Regardless, all I’m going to do is follow the price action and trade accordingly. After all, most of the trading world believes that the Federal Reserve is going to pivot sometime this year, even though the Federal Reserve swears up and down that they are not going to. Inflation is still way out of control in the United States, and there is no reason to think that they would change. However, betting against them pivoting has not worked out recently, because the market is leaning in one direction. In other words, the only thing that really matters is where price is going and not what things are supposed to do.