WTI Crude Oil Forecast: Market Continues to Hover Above $70

I think we need to be very cautious with position sizing.

The West Texas Intermediate Crude Oil market pulled back just a bit during the trading session on Tuesday, but then turned around to show signs of strength. Ultimately, the stabilization of crude oil does help, due to the fact that we had recently seen quite a bit of volatility, and that can have a major influence on whether or not people are willing to put money to work.

If we do break down below the $70 level, that could open up a move down to the $67.50 level, possibly even the $65 level. On the other hand, if we were to break above the last couple of trading sessions, then we could open up a move towards the $75 level. The $75 level is a large, round, psychologically significant figure and the scene of the most recent resistance barrier. With that being the case, I think that we are essentially stuck in a little bit of a range right now, but at this point it is likely that we will, at the very least, continue to see the $70 level be respected either as support or resistance, depending on which side of that level we stand

The 50-day EMA is flattening out in general, which suggests that we may have a little bit of sideways action ahead of us. Pay close attention to what the Federal Reserve does during the day on Wednesday, as the US dollar will have a great influence on what happens with the oil market, as the contract is priced in those US dollars. Furthermore, the Federal Reserve may say something to the effect of how they see the economy going forward, which could have a major influence on the demand for crude oil as far as perception is concerned.

The candlesticks of the last couple of days have formed a bit of a hammer, so that does suggest that there are plenty of buyers underneath. But there is also a significant amount of resistance just above. I think we need to be very cautious with position sizing, but ultimately this is a market that is likely to continue to see the reflation trade front and center, and will look at that as one of the biggest influences.

WTI Crude Oil

Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.