The West Texas Intermediate Crude Oil market (US Oil) rallied slightly during the trading session on Wednesday, but frankly, we have quite a bit of overhead resistance. After all, the 50-Day EMA sits near the $72.50 level and is grinding lower. With that in mind, I think this is going to be more of the same kind of back-and-forth noise that we have seen for most of the last couple of months.
Keep in mind there are conflicting ideas as to what is going on in the crude oil market with the concerns of global demand being front and center. After all, the market has to worry about whether or not the massive slowdown in the world economy is going to continue to drive down pricing, and therefore keep this market in this range. On the other side of the equation, you have to worry about whether or not OPEC cutting supply is going to keep supply tight. It is in the physical market, so that does provide a little bit of a floor.
US oil traders opt for small positions
Looking forward, oil will almost certainly continue to look at the $75 level above as resistance, while $67.50 underneath offer support, perhaps extending all the way down to the $65 level. With that, the market looks as if it is in roughly the $10 range, which is typical for summer trading, so now traders would be well advised to play both sides of the equation using those levels as a guide.
All things being equal, it is easier to be short this market than it is to be long, but with small enough positions, most traders will take advantage of both ways as the trend is so well defined now. Oil of course is a great barometer for the global economy, suggesting that perhaps there is a lot of uncertainty out there.
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