The West Texas Intermediate Crude Oil market was decimated on Friday, as traders got rid of anything related to the reopening trade. After all, if the coronavirus variant coming out of South Africa does cause major problems, there are concerns that there will be a lockdown, in which case demand for crude oil will collapse. Because of this, traders basically sold first and then asked questions later on Friday. It should be noted that the Friday session was somewhat thin, because the Thursday session was Thanksgiving. Because of this, the move was probably exaggerated so it will be interesting to see how this opens up today.
Furthermore, we need to think about whether or not the members of OPEC are willing to continue increasing production in the face of the major selloff. If that continues, it is very unlikely that OPEC will boost production, thereby causing oil to rise. Keep in mind that most traders probably were not even involved in the market during Friday, so more likely than not New York hasn't even reacted. If that is going to be the case, we could see a quick turnaround. If we can get a daily close above the 200-day EMA, then it is possible that we could find buyers. However, I do not think that is the case, so I think we need to sit on the sidelines and wait for stability.
That being said, news could change everything so keep that in mind. If we were to break down below the trendline that I have drawn just below, then I think we could go lower, perhaps focusing on $65, and then down to $62.50. Obviously, that would be a very “risk off” move, which is still not out of the realm of possibility, but you will have to pay attention to those coronavirus headlines. We are closing towards the bottom of the candlestick, so typically there is a little bit of follow-through, but we may end up forming a hammer by the end of the day. It is because of that possibility that I am not jumping in right away at the open.
