The West Texas Intermediate Crude Oil market rallied initially on Monday but gave back the gains as we continue to languish aside this bullish flag. That being said, it does suggest that we are going to go higher over the longer term, although it may take a while to kick this off. If we break above the top of the candlestick for Monday, that would essentially break the top of the flag, opening up a quick move to the $85 level.
Any break above the $85 level could have the market looking to fulfill its longer-term measured move, which is to the $100 level. That sounds a bit rich at this point, but it is clear that the lack of supply in the crude oil market is going to continue to be an issue, so it is difficult to see this as impossible. Quite frankly, the US dollar looks as if it is starting to lose some favor, and if that is the case it should help oil going forward. Furthermore, we have the reopening trade that propels the idea of oil as well.
On the other hand, if we break down below the bottom of the shooting star-shaped candlestick for the Monday session, then we could go looking towards the $80 level, possibly even the $50 level underneath. The market continues to see the bullish flag holding, so at this point in time I think we are simply looking for some type of catalyst to start going higher again. Because of the action that we have seen of the last several months, I have no interest whatsoever in trying to short this market. In fact, it is not until we break down below the $75 level that I would start thinking along those lines.
When you look at this chart, it is easy to see that crude oil tends to move in $2.50 increments, and I think that is going to continue to be the case going forward. I see no reason whatsoever for oil to fall for any significant amount of time, and I have to admit this is one of the more bullish looking charts that I follow at the moment, despite the fact that we formed a shooting star for the last 24 hours. With this type of trend, it is difficult to go against it.
