We should continue to see more of a “buy on the dips” attitude in this market, but we may need to stabilize in the short term in order to build a bit of a base.
The West Texas Intermediate Crude Oil market initially fell on Monday, but as you can see, we have turned around to show signs of life again. This suggests that we are going to go to the upside and try to pick things back up. After all, we have been in an uptrend for quite some time, so the idea of the market recovering and going positive again is not a huge surprise.
If we break above the highs of the trading session on Monday, then I will be putting a position on in order to try to take advantage of the longer-term uptrend. If we can take out the 50-day EMA, then it is likely that we will then take out the $80 level. Anything over there could then open up the possibility of a move towards the $85 level. The $85 level had previously formed a bit of a “double top”, which of course is a very negative sign, so a lot of people will be paying close attention to it. If we can blow through that area, this market could really start to take off.
On the other hand, if we break down below the bottom of the candlestick during the trading session on Monday, then it is likely that we will go looking towards the $70 level underneath. The $70 level is a large, round, psychologically significant figure and it is also backed up by the 200-day EMA that sits just above the $69 level. This is a market that I think has plenty of support levels underneath that could come into the picture.
Keep in mind that the demand for crude oil will continue to strengthen if we have the reopening trade, and due to the fact that OPEC has absolutely no interest in increasing production. Furthermore, the threat of the Strategic Petroleum Reserve being released seems to have come and gone, and even if it did get released, the reality is that it has already been priced into the contract itself. We should continue to see more of a “buy on the dips” attitude in this market, but we may need to stabilize in the short term in order to build a bit of a base.