Bullish Move, But Strong Resistance

As long as it stays somewhat stable, this is almost a “buy on the dips” market, but within a well-defined range.

• The West Texas Intermediate Crude Oil market has initially fallen during the trading session on Wednesday but turned around to show signs of life again.
• As it does, and we end up forming a bit of a hammer and it suggests that perhaps we are going to see more buying pressure.
• The $80 level above offers a significant amount of psychological resistance, but whether or not it holds completely is a totally different question.
• By breaking above that, the market could very well go to the $82.50 level, which has been the top of overall consolidation.

Global Economy Is Slowing Down

That being said, if we break down below the bottom of the candlestick for the day, we would be breaking down below two hammers. This would obviously be a very negative sign and would almost certainly send the market down to the $75 level. Underneath there, we have the $72.50 level, and I think a lot of people would be looking at that as potential support yet again. After all, it has been the bottom of the longer-term consolidation, so I think there is going to be a big fight in that area.

The markets continue to go back and forth based upon the idea of possibly trying to determine whether or not there is going to be enough global demand for crude oil, as it looks like the global economy is slowing down. If that’s going to be the case, that makes a lot of sense that we would see prices suppressed. However, China is reopening and there are a lot of people out there banking on that being the savior for oil. Furthermore, the United States has been emptying its Strategic Petroleum Reserve for a while now, so sooner or later the US government steps into the fray and starts buying. While it was good for buying midterm votes, it really didn’t do much to change the situation.

Having said that, they will have to replace that area, and therefore it’s worth noting that sooner or later a huge fire steps into this market. It is because of this that I believe the bottom of this consolidation area is probably about as low as we go unless the economy completely collapses. As long as it stays somewhat stable, this is almost a “buy on the dips” market, but within a well-defined range.

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