Price to Retest Previous Trendline

If we do continue to break down you have plenty of time to get involved in that move, just like you would have plenty of time to ride an uptrend.

• The West Texas Intermediate Crude Oil market rallied a bit during the trading session on Friday, after initially falling in reaction to the jobs number.
• It is currently hanging about the $104.50 level, putting this market just below the previous uptrend line.
• The previous uptrend line has held as resistance so far, so “market memory” appears to be held at the moment.

If we can break above the previous uptrend line, then it’s possible that the oil market may go looking to reach the 50-day EMA above, which is just below the $110 level.

Breaking above the $110 level opens up the possibility of a move to the $120 level, which might take a bit of effort, but it is most certainly a possibility. On the other hand, if we turn around and break down below the lows of the trading session on Friday, then I think we will kick off more selling pressure.

Oil Supply and Demand

Unfortunately for oil traders, there are so many different things moving at the same time that could cause problems in both directions that this is going to remain a very difficult market to get a handle on. The most important thing you can do is limit your position size and keep a cool head. The supply of crude oil is still far below where it normally is because we had just spent the last two years hiding in our homes instead of drilling for crude oil. With that in mind, it looks as if the supply is nowhere near strong enough or demand, but it should also be stated that there is serious concern about demand destruction going forward as it looks like we are heading into a recession. Because of this, the market looks as if it doesn’t really know what to do, but it is worth noting that the biggest candlesticks as of late have all been red.

The 200-day EMA has offered significant support near the $95 level, but if we were to break below there, it’s officially the end of the trend, and we would probably fall quite drastically. Nonetheless, I think you are probably better off waiting to see what happens with this trendline retest than anything else in the meantime. After all, if we do continue to break down you have plenty of time to get involved in that move, just like you would have plenty of time to ride an uptrend.