Crude oil markets do have a bad habit of getting very noisy and then making massive and impulsive moves.
The West Texas Intermediate Crude Oil market did very little on Tuesday as we continue to hang about the $110 level. The $110 level had previously been significant resistance, so for it to offer support would be expected. The markets have had a general uptrend built-in, as buyers have continued to be a little bit more aggressive than sellers. Furthermore, the 50-day EMA is sitting at the $105 level and is rising. I think of it as a “dynamic trendline.”
You can also make an argument that we are in an up-trending channel, and it’s possible that the overall trend will continue in more of a grind than anything else. In fact, it’s not until we break above the $110 level that I would consider this a market that could be sold. In that scenario, it’s likely that the crude oil market would unwind, perhaps reaching toward the $95 level, maybe even the 200-day EMA underneath.
I do believe that dips will continue to attract a lot of attention, so if you are patient enough you should get an opportunity to get long of this market. In fact, think of it as value going forward. The market will continue to focus on demand and the lack of supply. At this point, the market is going to continue to look at this as a potential longer-term investment, and people are starting to look at the idea of exploding demand through the summer driving season.
If we do break down below the 200-day EMA, the market will then fall apart, perhaps dropping and changing the trend overall. That’s very unlikely, but it is something that you need to keep in the back of your mind. I do believe that given enough time the market will go looking to reach the highs again, probably sometime in the middle of July or August. This market is very choppy though, so it does make sense that we would see this market favor short-term traders with an upward bias. Crude oil markets do have a bad habit of getting very noisy and then making massive and impulsive moves. At this point though, it looks like it’s more back-and-forth chop than anything else.