It is make or break time for oil

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The talk of the city may be about higher bond yields today, but the oil chart is also noteworthy.

WTI D1 18-01

WTI crude is trading at $ 85 today and is the highest since October and November highs last year. That sees buyers face a key resistance region, staying in search of a fifth straight week of gains.

As much as there is talk of a stricter supply lately, the letters do say that we may be running it close to overbought conditions and there could be some technical exhaustion if the upper resistance region holds.

I was a proponent of higher oil prices, but this is almost a “make or break” point for the last run.

Even Brent’s crude chart suggests a similar kind of technical price action:

Brent W1 18-01

Anyway, going back to WTI crude, any reproach from here could correct to $ 80 or maybe even the 100-day moving average (purple line) near $ 76. But considering the fundamental background, I would argue that they will prove to be good purchase levels if and when we get there.

The big warning, of course, remains China, but the same can be said of many other asset classes.

That being said, if buyers can crack the above resistance region, there is little to stop oil from a potential build-up to $ 95 or even $ 100 – at least from a technical perspective. I doubt we will see such a major extension that quickly after four weeks of gains but stranger things have happened before in markets.

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