Oil is setting up to make another big move.
It’s been seven weeks since we last looked at the chart of oil. Back then, oil had been stuck in a relatively tight trading range for a couple of months.
All of the various moving averages had come together, building up energy for a big move in one direction or the other. And, I was willing to bet on a bullish move happening within just a few days.
I was wrong.
Oh sure, we got the big move right, and we got the time frame right. But, we got the direction horribly wrong.
Oil broke down. The price of the gooey black stuff fell from $43 per barrel to $38 per barrel in one week. That’s a 12% drop.
Since then, oil has rallied back up to $41 – where it closed on Friday. All of the various moving averages have coiled together again, and oil looks ready for another big move. And, I’m looking for a little redemption.
Take a look at this chart of West Texas Intermediate Crude oil (WTIC)…
On the other hand, if oil can break out to the upside of its trading range, then it could rally back up to the March high near $47.50.
From a purely technical perspective, it’s probably a coin toss as to which way oil breaks.
But, with the global economy beginning to open up again, airline travel starting to come back, oil inventories steadily declining, and investor sentiment towards oil in such a pessimistic state… I prefer to take the contrarian side of the trade and bet that oil breaks higher.
Either way, given how tightly all the various moving averages are coiled together, we’ll likely see a big move in oil within the next week or so.
Best regards and good trading,
Do you agree with Jeff’s prediction that oil will break higher in the upcoming weeks? Or, do you think reopening of businesses and travel could cause it to move in the opposite direction?
Let us know your thoughts – and any questions you have – at [email protected].
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