- The West Texas Intermediate Crude Oil market has fallen hard again during the trading section on Wednesday, as we have made a fresh, new low.
- At this point, it looks like the oil market is going to continue to drop, as demand for crude oil is almost certainly falling by the wayside.
- With that being the case, I would look at this through the prism of fading rallies, and at one point during the day it even looked like we were going to see that happen.
The fact that we are closing at the very bottom of the candlestick for the session suggests that there is more follow-through coming, so a breakdown through the bottom of the candlestick may bring in fresh shorts. Regardless, if we rally from here, at the first signs of exhaustion, there will be plenty of people willing to get involved. In fact, it looks like the 50-Day EMA is now going to offer a ceiling, assuming that we can get anywhere near there. The $80 level of course is psychologically important, so I do believe that will eventually come into the picture if we do rally.
Looking for Signs of Exhaustion
On the downside, I think we could go as low as $70 now that we have gotten through the $72.50 level. The market continues to see a lot of volatility and of course as we go into the later part of the year, we will more likely than not see liquidity disappear. At this juncture, I think this is a situation where you have the negativity picking up yet again, as we have been selling off for quite some time. In fact, I think this is a serious breach of trust for the buyers, therefore I think it’s probably only a matter of time before we get some problems.
The 50-Day EMA is not only the ceiling, but it is also drifting and sliding lower, showing that the trend is most certainly ensconced in this market. Until the global economy turns around for more positive outlook, I just don’t see how crude oil performs well at all. Because of this, I’m looking for signs of hesitation and exhaustion then I can start shorting again more than anything else. While I have only one direction in mind, I do not want to chase this trade.
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