Crude Oil Forecast May 3, 2016, Technical Analysis

WTI Crude Oil

The WTI Crude Oil market fell during the day on Monday, breaking the bottom of the shooting star that form for Friday. That being the case, the market could very well drop a bit from here, as it has been a bit overextended. There is potential support at the $44 level, and the $42 level underneath that. Ultimately, this is a market that has quite a bit of bullish pressure underneath it though, so it’s difficult to imagine that the trend has changed quite yet. A supportive candle below would be reason enough to go long, and it is not until we break below the $42 level that we can even entertain the idea of selling as the bullish momentum has been so out of control. A break above the top of the shooting star is also bullish, but seems less likely as this is an area of contention.

 

Brent

Brent markets fell hard during the day on Monday, smashing into the $46 handle. This is a market that should continue to drop from here, perhaps reaching towards the $44 level. That’s an area that should be supportive though, but may give way. The real support is closer to the $42 handle, and as a result we could find a short-term selling opportunity for those who have no issue going against this type of momentum. For us though, it makes more sense to wait to see whether or not we get a supportive candle somewhere between here and the $42 level, and as a result we are on the sidelines. But, we should mention that the longer-term trend is still down, even though we’ve had a massive rally of the last couple of months.

The candle is fairly strong for the session, and that of course suggests that we will get some follow-through. With this, we recognize that the market will probably be negative for the short-term, but also feel that it’s only a matter of time before the buyers reassert their control. With this, the one thing that we do expect as volatility.