Potential signal:
- I’d be a buyer of crude oil only.
- On a move above $74, I would have a stop loss at $72.25, with a target of $77.66.
The crude oil market has been back and forth during the trading session on Wednesday as we continue to see a lot of noisy behavior, right around the crucial $72.50 level.
Ultimately, this is a market that continues to move on the latest headlines, but almost none of which are good for crude oil falling.
In other words, I think we will continue to see plenty of buyers on dips, and you have to look at this market as one that might be trying to offer value every time it falls.
Technical Analysis
The 200 Day EMA is near the $69 level and rising, insofar continues to offer plenty short-term drop from here should open up the possibility of buying value based on the fact that there are so many dangers headlines coming out of the Middle East right now it’s almost impossible to go against the bullish momentum. That being said, if we were to break down below the 200 Day EMA, we could drop as low as $65, an area that previously had been significant resistance, and now also has the 50 Day EMA hanging around in that area. In other words, certain amount of “market memory” could come into the picture to offer a buying opportunity on a drop to that level.
On the upside, I’m not really sure what to tell you about where a “ceiling” might be forming. In the short term, it looks like the $78 level could offer that, but it would only take one or 2 specific types of headlines to drive the oil market all the way up to the $80 level, and possibly even further. What I do find rather interesting is that despite the fact that Iran and Israel are now at war, the oil rally has been somewhat reasonable in this environment. One would expect an attack in the Middle East to produce even more explosive moves, but I think a lot of traders out there just simply in a “wait and see” type of moment. Regardless, the one thing you can’t do here is short this market.
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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.