- The rumor going around the floors today is that OPEC is getting ready to announce a 2 million barrel per day production cut, which is would obviously bring down supply, and therefore should boost crude oil prices.
- At this point, the market seems like it’s trying to get ahead of them, but we are still very much in a major downtrend.
- With that in mind, I suspect that we’ve got a situation where the market participants will continue to look at this through the prism of this down trending channel until something is proven differently.
The Crude Oil Is About to Make Some Type of Big Move
In this scenario, I suspect that we have a situation where there are a lot of moving pieces at the same time. The 50-Day EMA sits right at the downtrend line which is at the top of the descending channel. At this point in time, is becoming increasingly obvious that the market is about to make some type of big move.
If OPEC disappoints with its production cut size, that could be rather ugly for this market. In that scenario, we would be looking at a market that certainly has a lot to prove and would almost certainly drop below the $85 level. The market will continue to be very noisy in general, but I do think that this is all rumor driven, which is the absolute worst way to trade the market. Unfortunately, oil is extraordinarily susceptible to these rumors, and “leaked statements.”
If we break above the 50-Day EMA, we will certainly looking to the $90 level, possibly even the 200-Day EMA. If we were to break above that, then you’d have to assume that the market has changed trends. However, break down below the $90 level almost certainly opens up the idea of $82.50, We’ve been in a downtrend for a while, so do not be surprised if it continues. The next couple of days will be important, so we’ll have to see how this plays out but right now it looks as if the oil market is approaching a significant resistant barrier, one that I think everybody will be watching closely. Having said that, this probably comes down to whether or not OPEC lives up to the rumors, which it has a long history of messing things up so who knows at this point in time?
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