The West Texas Intermediate Crude Oil market has rallied a bit during the trading session on Wednesday to break above the top of the hammer from Tuesday, and it does suggest that the market is ready to go looking towards the $110 level. After that, the $115 level then gets targeted. Keep in mind that the oil market has been in an uptrend for quite some time, and while we did form a lower high, the reality is that we have not formed a lower low.
Looking at the chart, you can see that the 50 Day EMA is walking right along the uptrend line, which of course is a crucial thing to pay attention to on the chart. The 50 Day EMA had been tested during the trading session on Tuesday and then bounced rather significantly. All things being equal, this is a market that I think probably continues to find buyers on dips because there is a structural issue with the crude oil markets that the latest headlines coming out of peace negotiations will not change. The market is likely to see plenty of volatility, but at the end of the day, the structural lack of supply continues to be the biggest issue.
When you look at this chart, it is easy to see that things have been very noisy as of late, and the nonsense coming out of the rumor mill when it comes to the peace negotiations in the Ukrainian war has not helped the situation. The market is going to continue to be noisy, but I think that buying on the dips still continues to offer a bit of value that people will be looking towards.
The other side of the equation is that if we break down below the trendline, and could send this market towards the $95 level, possibly even the $90 level. That obviously would have a major “risk-off” attitude to it and would take quite a bit of effort. However, it is always possible so you should keep this in the back of your mind. As things stand right now, I still like the idea of short-term pullbacks being an opportunity to pick up a position, but I also recognize that simply buying and holding is very difficult to do.
