The West Texas Intermediate Crude Oil market got absolutely hammered during the early hours on Monday, as it looks like we are trying to price in some type of massive recession. Quite frankly, the OPEC has proven itself to be feckless, not being able to produce a decent production cut, and it looks like the market is punishing them for it. We are currently at the bottom of the overall consolidation area as I write this article, and it looks like we may break through. If we close below the $72 level, I suspect at that point we have a move down to the $70 level rather quickly.
On the other hand, if we can produce some type of bounce, it may possibly send the market back into the overall consolidation area. This would assume that there are value hunters in this area, which would make a certain amount of sense based on technical analysis. However, this selloff has been ruthless, so I think we’ve got a serious potential for a major breakdown.
Brent Crude Oil Technical Analysis
The Brent markets also have broken down significantly, now it looks like we are trying to price in some type of major collapse in global demand. If we do break down below the $75 level, that can send this market much lower. On the other hand, if the value hunters are stepping back into the market, it would make a certain amount of sense, but I would not trust that bounce for anything more than some type of short-term bounce.
All things being equal, this is a situation where you continue to see a lot of volatility, so you need to be very cautious with your position sizing and therefore this might be a market that is almost untradable between now and the end of the year. I suspect we the breakdown from here between now and the end of the year, or we stay in the same range that we have been in for the last couple of weeks. I don’t see a sudden bullish move anytime soon as it looks like we are slowing down economic growth in general.
Being FXEmpire’s analyst since the early days of the website, Chris has over 20 years of experience across various markets and assets – currencies, indices, and commodities. He is a proprietary trader as well trading institutional accounts.