The West Texas Intermediate Crude Oil market has had a very volatile trading session, dipping down to the $117 region, before turning around and showing signs of life near the $120 level. The market had recently broken out of a previous triangle, and now it looks as if we are trying to go much higher. Ultimately, if we can break above the top of the candlestick for the day, then it’s likely that we could go to the $125 level. Breaking above the $125 level is something that I would anticipate seeing given enough time.
Looking at this candlestick shows you just how volatile the world is going to be. This is a market that has a lot of crosswinds, as the market has to worry about inflation, which in turn should push the price higher, but at the same time, it’s likely that we take a look at the reopening trade pushing oil much higher as a lot of production was taken off-line during the pandemic. Because of this, we are all over the place and of course, there is the added pressure of whatever is happening with Russia at the moment.
Because of this, I think the market is going to continue to be very volatile, but given enough time there are plenty of buyers out there willing to take advantage of value when he shows up. The $115 level should be a significant amount of support based upon the “market memory” of the triangle. The 50 Day EMA has breached the $110 level, and now looks as if it is going to go to that area above, namely the $115 level.
If we were to break down below the 50 Day EMA, it’s possible that the market could go lower and look to the uptrend line of the triangle. Breaking below that then as this market breaking apart. I think it’s much more likely that we go higher, perhaps breaking above the $130 level after a short-term pullback allowing for the market to build up momentum. Keep in mind that crude oil is a very volatile asset, so you need to be cautious about your position size but it’s clear that you should be buying and not selling, as has been the case for most of the last six months or so.