The West Texas Intermediate Crude Oil market rallied on Tuesday, but we continue to see a little bit of resistance near the $82.50 level. That is an area that has been important more than once, and the fact that we have pulled back from there couple of days in a row suggests that we are perhaps getting ready to consider a short-term pullback. That pullback is probably exactly what this market needs more than anything else, due to the fact that we have seen so much in the way of parabolic momentum.
Crude oil will continue to be very valuable going forward, so I think that with the reopening trade going in full force, it makes sense that oil continues to strengthen. Furthermore, the fact that nobody bothered drilling oil for over a year is going to be a major problem as well. With the sudden surge in demand, it is difficult to imagine that prices will do anything other than shoot higher. At this point, I anticipate a move towards the $85 level, but I do not necessarily know that it will happen immediately.
Pullbacks at this point will probably find support at the $80 level, because it is a large, round, psychologically significant figure that a lot of people will pay close attention to, but even if we break down below there I think we have a lot of support at the $75.55 level, which is where the 38.2% Fibonacci retracement level resides. The 50-day EMA is racing towards it, and it is essentially where we had broken out of previously. All of that should help the idea of “market memory” support this market going forward.
II would prefer to see a pullback that offers a bit of value before we go higher, but I do recognize that it is probably only a matter of time before buyers would come in to pick up “cheap oil”, because that has been the game for a long time. With industrial demand soaring and supply seemingly lacking, it is going to be a while before we see a bear market in crude oil. That does not necessarily mean every day is positive, so if we get any substantial pullback, it is time to start going long again.
