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WTI Crude Oil Forecast: Pulls Back into Channel – 19 May 2022

We are rising over the longer term, so it does suggest that perhaps we are still going to grind a bit to the upside.

The West Texas Intermediate Crude Oil market pulled back on Wednesday as we continue to trade in a significant channel. The channel of course has been valid for a couple of months now, so it does make sense that we would see it hold. This is a market that continues to see a lot of volatility and noisy behavior.

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The 50-day EMA is sitting at roughly $103, and it makes for a certain amount of support. It should be noted that we have support between the 50-day EMA and the uptrend line, as we have seen it hold in that region multiple times on the way up. The market has been grinding higher for quite some time, and now we are going to be paying close attention to whether or not we are going to see demand pick up for crude oil, or if we are going to see it fall due to inflationary pressures and demand destruction.

Looking at this chart, the market will continue to be bullish unless we break down through that uptrend line, which is at the $100 level. Breaking down below the $100 level opens up the possibility of a move toward the 200-day EMA, which sits just below the $90 level. This is a market that will continue to see a lot of volatility and choppiness, but whether or not we can break it down would be a completely different question. I think we have a lot of things that we have to pay attention to, not the least of which will be whether or not the economy is starting to take a major downturn. If it does, that could change things rapidly. It is worth knowing that the OVX is rising, showing that volatility is getting worse, not better. In that scenario, it is difficult for crude oil to hang on to gains. That being said, we are rising over the longer term, so it does suggest that perhaps we are still going to grind a bit to the upside. On the other hand, if we turn around and take out the highs of the trading session on Tuesday, it would show an acceleration to the upside and we should go much higher.

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