The WTI Crude Oil markets fell during the balance of the session on Tuesday, touching as low as the $102 vicinity. The resulting candle for the day was a nice looking hammer though, and we are at the bottom of the recent consolidation area as well. Because of this, I feel that this market is trying to tell us that it is getting ready to bounce, and short-term traders should enjoy a nice trading opportunity to the upside at this point. I believe that the consolidation will probably go as high as $110, and that the move to the $112 level couple of weeks ago was probably more or less a bit of an anomaly.
If you think about it, this makes perfect sense. After all the markets have been focusing on the value the US dollar more than anything else, and whether or not the Federal Reserve is going to taper off of quantitative easing. Now that they have chosen not to, the US dollar got pummeled but later people start to question whether or not there is economic activity. Without economic activity, there's not much use for oil.
Continued consolidation
I believe there is a lot of money to be made in this market right now. If you are patient enough and can trade the shorter-term charts, you will find plenty of trading opportunities over the course of the next several weeks. I just don't see anything like this to make the market either break up or break down, and because of that you can take advantage of the sideways volatility.
Granted, there is going to come a time when we finally do breakout of this consolidation area, but certainly this point in time continued sideways action is more than likely. That being the case, I think just simply trading four-hour charts or something to that effect is probably going to be the way to go. For that matter, if you are cautious you can simply take profits at $108, which is still a nice healthy profit on a short-term move in this market.
