The WTI Crude Oil markets tried to rally during the session on Wednesday, but as you can see got sold off towards the end of the day in order to form a shooting star. This is a bit disconcerting though, as it sits right above the $93 support level. The shooting star normally means that we are going to see more selling pressure, and this could lead to even lower oil prices. This could be due to several different factors, and the US dollar strengthening overall certainly is not helping the situation in the oil markets at this point.
That being said, I believe that a break above the top of the shooting star would be an extremely bullish sign, and I would be a buyer at that point, aiming for the $98.50 level. On the other hand, a move below the $93 level on a daily close would confirm this candle that we have just formed, and probably send the market down to $90 at that point in time. The move might be a bit choppy, but certainly as you can see the oil markets have come completely undone in the last couple of weeks so it would necessarily be a stretch of imagination.
Watch the US dollar, and industrial numbers.
The market finds itself in a little bit of a weird dichotomy at the moment, simply because the labor market is starting to pick up which should be good for the oil demand, but at the same time the US dollar strengthening, which of course is negative for the price of oil. That being the case, the market will continue to be choppy regardless of which direction we go, and although I think that this market is well oversold, I would be a bit nervous holding onto a trade for any length of time.
With the situation being as it is in the crude oil markets, I am much more comfortable playing options than taking a straight position in the futures market. Selling calls at higher levels would be an easy way to make money, at least in theory. That is what I'm planning on doing, at the moment, or perhaps even the way some type of straddle as I think this market should more than likely find itself going sideways, at least in the short term.
