- The West Texas Intermediate Crude Oil market initially tried to rally during the trading session on Wednesday, but turned around to show signs of exhaustion.
- We had just broken the neck line of an inverted head and shoulders, so now the next question is whether or not that head and shoulders neck line will offer support on a pullback?
- The 50-Day EMA sits right underneath there as well, so if that area doesn’t hold, that would be a very negative turn of events.
WTI Crude Oil Breakdown Scenario
If in fact it does not hold, I would anticipate that the market could go down to the $80 level. It’s also worth noting that the market recently formed a little bit of a “double bottom”, and therefore it’s likely that we will look at that area as a potential floor in the market and it should offer quite a bit of support. If we were to break down through that level, then oil will absolutely collapse.
That being said, I think the negative argument for crude oil is the fact that we are heading into a major recession, as the world economic momentum is dropping. The trading session on Wednesday featured a few transport companies in the United States talking about how they have no pricing power, due to the fact that there is such little demand. While China is getting ready to reopen, it’s worth noting that exports coming out of China have been absolutely crushed. It’s not necessarily anything to do with China itself, but the fact that they don’t have anybody to sell their goods to at the moment. In other words, there’s a lot of reasons that think that the demand for oil will continue to slip.
Candlestick for the trading session is a bit of a shooting star, so that is a negative look. However, if we were to turn around a break above the top of the candlestick, it would be a very bullish sign and could send oil looking to the 200-Day EMA above, suggesting that the inverted head and shoulders pattern was of course something worth paying attention to, and therefore a lot of technical traders would more likely than not jump into the market based upon the action. In general, I would anticipate a lot of choppy behavior over the next couple of days.
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