Oil Continues to Hang Around the $80

At this point, we are trying to determine whether or not that inverted head and shoulders pattern is valid from a technical standpoint.

• The West Texas Intermediate Crude Oil market has rallied a bit during the trading session on Wednesday, as we continue to see the $80 level offer a bit of support.
• Furthermore, we have the 50-Day EMA hanging around there, right along with the neckline from the inverted head and shoulders that I have marked on the chart.
• All things being equal, this is a market that I think continues to see a lot of choppy behavior, and as a result I think you need to look at this through the prism of a very short-term market.

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Crude Oil Will Continue to See Buyers

That being said, it is worth noting that the inverted head and shoulder has not been negated, at least not yet. In other words, I think you will continue to see short-term buyers jump into this market and take small positions. Whether or not we can actually break out to the upside is a completely different question, but it’s possible that we see more noise than anything else.

You should also keep in mind that the market will continue to be squeezed between a couple of different narratives, and that of course is something that you need to pay attention to. After all, the market is likely to see a lot of demand destruction out there as it looks like the global economy is going to slow down. This obviously has a drastic effect on demand for crude oil, as it is the lifeblood of global trade. Adding more downward pressure to the idea of oil is that central banks around the world continue to tighten monetary policy. Overall, as the monetary policy tightens, the idea is that it will bring down global demand in general.

It’s worth noting that US truckers recently have complained that they don’t have pricing power anymore, because there is not anywhere near the demand there once was. This I think is something that you need to pay close attention to. However, if we break above the highs of the last couple of days, it’s very possible this market could at least make an attempt to get to the 200-Day EMA, which is right around the $87 region. At this point, we are trying to determine whether or not that inverted head and shoulders pattern is valid from a technical standpoint.

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