The West Texas Intermediate (WTI) and Brent crude oil markets have experienced a week of tight consolidation after a massive gap following OPEC's announcement of a 1.6 million barrels per day cut starting in May. While the Non-Farm Payroll announcement came out as expected, it had very little influence on the crude oil market. As we move forward, it's important to keep an eye on key support and resistance levels to understand market trends.
WTI Crude Oil
- For WTI crude oil, the market gapped higher and hit the 200-Day EMA, leading to a tight consolidation range.
- While there is no immediate catalyst for a pullback, there is a major gap underneath that remains to be filled.
- If the market breaks down below the bottom of the candlesticks of the previous week, WTI could very likely drop down to the 50-Day EMA, just below the $76 level. However, if the market turns around and takes out the 200-Day EMA on a daily close, it could go looking toward the $87.50 region.
Brent Crude Oil
For Brent crude oil, the market also experienced a gap higher at the open on Monday and has been showing signs of hesitation around the $85 level, just below the 200-Day EMA. This suggests that we may see some type of squeeze sooner or later, and if and when that happens, it could present a relatively straightforward trade. If the market breaks the lows of the week, it could drop down to about $80.25. However, if it turns around and takes out the 200-Day EMA, the initial target will be the $90 level, with the possibility of a move to $95 or higher.
It's worth noting that gaps in the futures market tend to get filled eventually, so investors should keep this in mind when making trading decisions. As we move forward, keeping an eye on the 50-Day and 200-Day EMA levels can help investors understand market trends and make informed trading decisions.
While there is no immediate catalyst for a pullback in crude oil prices, investors should remain cautious and keep an eye on key support and resistance levels. Breaking down below the lows of the week could lead to a drop in prices while taking out the 200-Day EMA could lead to a rise in prices. Understanding market trends and having a clear trading plan can help investors navigate the volatility of the crude oil market.
Potential signal(s): On a move below $79.50 in US OIL, I am selling to reach $76.50, with a stop loss just above $81. On a move above the $82 level, then I would be a buyer with a stop loss at $80, and a target of $82.50.
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