Price of WTI climbed yesterday despite a myriad of bearish factors trying to pull the sweet crude lower. First off the bat prices were pulling back from the decline after Tuesday’s surprise rally. This decline hit a low of 96.28 during early US session, but started rebounding up before the 96.25 support was truly tested. This seemed to suggest that the technical pullback is over, but bearish gods weren’t done – inventory numbers from Department of Energy showed a higher than expected growth in Crude stockpiles, sending prices to a low of 96.19 at 10.30am EST when the news was announced. Nonetheless, bulls survived as prices rebounded quickly, with 96.25 surviving the 2nd test.
Unfortunately for the bears, they did not get 3rd time lucky. The surprise tapering by Fed was unable to keep price down even though Stock prices and other risk correlated assets were pushing lower. At this juncture, bears must be wondering what they need to do in order to see Oil prices lower (and one wonders if they feel like they have been rick-rolled).
That doesn’t mean that bulls should be proud of themselves though. There isn’t any strong fundamental reasons to support elevated crude prices, and all the ebb and flow of price action seems to be revolving around short-term technicals. If this is true, the likelihood of 97.6 resistance holding is high, and we could see prices heading down towards 96.25 in the near term. Stochastic readings agree as well, with Stoch curve currently within the Overbought region and is starting to cross below the Signal line, suggesting that a bearish cycle may start soon. As such, it will be extremely risky to continue buying WTI with strong downside risks, and traders wanting to speculate on current bullish momentum may wish to seek further confirmation (e.g. break above 96.6) before committing.
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