The West Texas Intermediate Crude Oil market sold off quite drastically on Tuesday as we plunged towards the $88.50 level. However, we have turned right back around to show signs of life again, and now it looks as if we are ready to go higher. Given enough time, it is very likely that we would see this market try to take out the highs of the trading session, especially as oil is so bullish.
On the other hand, if we were to break down below the bottom of the candlestick for the trading session, then it could open up fresh selling as crude oil could go looking towards the $87.50 level, perhaps even down to the $85 level. The $85 level has been important more than once, so I think it is essentially the “floor in the market” as things stand right now. Keep in mind that OPEC is going to continue to struggle with the idea of pumping out enough oil to satisfy global demand as we reopen around the world. Furthermore, you should keep in mind that there is a bit of influence coming from the currency markets as well, as the crude oil market obviously is negatively correlated to the commodity that is priced in that same currency.
Looking at this chart, it seems as if we are ready to see quite a bit of bullish pressure return, because this is a market that had gotten far ahead of itself. The market making a fresh, new high to reach towards the $95 level would be the most likely of targets over the longer term. That being said, the market is probably going to see a lot of volatility as we get an inventory number in the next 24 hours. The market will probably be just as noisy as the other ones, but at this point you cannot read too much into short-term moves. The longer-term trajectory of course is to the upside, so you do not want to try to short this market anytime soon. That being said, if we do break down below the $85 level, it might be open season on crude oil going forward. That seems to be very unlikely, but it is something that you need to be aware of.
