Crude Oil Price Outlook – Crude Oil Continues to Rally

WTI/CL Technical Analysis

The light sweet crude oil market initially dipped a bit during the early part of the Friday session, only to turn around and show signs of life. As a result, we are hanging around just above the 50-day EMA. Most traders here are still reacting to the idea of sanctions against a couple of Russian companies. At this point in time, I think we probably have to look at this through the prism of a market that is doing everything it can to try to break out to the upside. However, I also look at this as a market that has a major issue at the moment, which, of course, is the fact that there is still quite a bit of supply.

I think this ends up being nothing by the time it’s all said and done, because we’ve seen sanctions against Russia previously, and they always turn out the same way. Supposedly, China is buying less oil from Russia—we’ll see. That just means they’re probably buying it in secret. So, with that being said, we’re overbought. I’m looking for signs of exhaustion to short, but we’ll have to wait and see if we get it.

Brent Technical Analysis

Brent looks very much the same. It’s above the 50-day EMA and, in fact, looks maybe a little bit stronger, which makes a certain amount of sense considering that Brent is generally more of an international grade of oil anyway. The market being just above the 50-day EMA brings the 200-day EMA into sight, but right now, I still think we’re overdone.

I don’t see the proper price action to start shorting, but I certainly don’t want to chase it 8% higher two days later. It’s just bad trade management. So, unless you happen to already be long the market, you’re simply waiting for your opportunity to step on this rally that probably ends pretty quickly. After all, we recently had a war in June, and within two weeks, we had already fallen right back to where we were.

This will either get resolved, or it will get out that the Russians are selling oil to China and India—just like they always have—and we fall right back down. Ultimately, this is a market that I’m looking to short; I just don’t have that signal yet.

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