November 24, 2022 [DailyForex] – If we do rally from here, then market participants will probably be looking at the $85 level as a potential barrier.
During the trading session on Tuesday, we have seen a little bit of a bump higher in the WTI Crude Oil market, after forming a nice hammer during the trading session on Monday.
Monday’s action was a lot of rumors floating around that the next OPEC meeting was going to see an increase of production by 500,000 barrels per day.
Saudi Arabia came out and firmly denied that, and at that point markets turned around quite drastically.
Having said that, we are still trying to figure out whether this is about a lack of supply, or perhaps even thinking about the lack of demand. After all, the world is heading into a global recession, so that does mean that there will be less demand for oil. However, at the same time we have a lot of issues when it comes to supply and, of course, on December 5, the European Union will have to abide by the ban on Russian crude oil, so that obviously will take some of the momentum out of the market as far as supply is concerned as well.
Too Early for a Trend Change
If we do rally from here, then market participants will probably be looking at the $85 level as a potential barrier. This will be further exacerbated by the 50-Day EMA sitting just above and dropping significantly. That should be a bit of a dynamic ceiling in the market, but if we were to break above there it’s likely that we could go to the $95 level given enough time.
On the other hand, if we were to turn around and break down below the bottom of the Monday candlestick, I think that opens the floodgates, perhaps sending the WTI Crude Oil market below the $75 level, perhaps even down to the $72.50 level. This is a market that I think continues to see a lot of volatility more than anything else, so you do need to be cautious about your position sizing because quite frankly there will be a lot of drama surrounding oil. Furthermore, keep in mind that this is Thanksgiving week, so there will be some funky hours later in the week when it comes to electronic trading, thereby hurting liquidity in general. All things being equal, it does look like we are trying to recover and form a little bit of a “double bottom”, but it’s a bit early to think that it’s a trend change waiting to happen.