All you can do is follow the momentum and right now the momentum is to the upside.
The West Texas Intermediate Crude Oil market rallied significantly on Monday to break above the crucial 50 day EMA and the $75 level. At this point, I think the market will eventually continue to go looking towards the $79 level above where we had been breaking down from. If we break above there, then crude oil is likely to go towards the all-time highs again, as the complete reversal will probably be due to the fact that traders are no longer worried about the omicron variant shutting down the world’s economy.
If that is going to be the case, then it stands that oil demand will continue to be strong, and that is what the market desperately needs. To the downside, the $74 level should offer support, right along with the $73 level. As long as we can stay above all of that, then I will be looking to buy dips as value in what I think could be one of the better moving markets early in 2022.
If we were to turn around and break down below the 200 day EMA, that could be rather negative for the markets, mainly because it already looks as if we have broken out so that would be a complete review of the attempt at strengthening. We made one heck of a turnaround so far, and I do think that we have further to go based upon what we have seen on Monday. Furthermore, once traders come back next year to put risk on for their books, crude oil will be one of the first places they will probably get involved in, so I imagine this will attract quite a bit of attention. Remember, most of the bigger funds are closing out positions right now in order to book profit for the year, but once we get into the new year, they have to load their books back up and get back to work. I anticipate that crude oil is going to be one of the better places to be, and I also think that what we are seeing now is smaller traders trying to front run that potential move based upon the last two weeks. Either way, all you can do is follow the momentum and right now the momentum is to the upside.
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