Technically, light crude oil futures are still in a downtrend, but momentum has turned slightly higher.
The short-term range is $54.84 to $58.88. It’s 50% level at $56.86 stopped the selling on Friday and is holding up today. The market has also recovered another 50% level at $57.60, which is helping to build the momentum.
The $58.73 Battleground: Why the 50-Day Moving Average Could Make or Break This Rally
Standing in front of the rally and a potential breakout is a 50% level at $58.62 and the 50-day moving average at $58.73. It’s the 50-day moving average that has my attention and hopefully the attention of a few major buyers. Given this is a holiday week, we’re going to need some real buying to sustain a longer-term rally over the 50-day MA. Otherwise, the breakout attempt will fail.
Bull Case: Breaking Above $58.73 Opens Path to $60.48 Target
For bullish traders, we’re looking for a sustained move above the 50-day moving average to trigger a spike into the 200-day moving average at $60.48.
Bear Case: Failed Breakout Could Trigger Swift Retreat to $54.84
Bearish traders are likely to continue to lean on the 50-day as resistance. If the weak buyers get tired of trying to breakout to the upside and pull their bids, prices could collapse under $56.86, leading to a potential retest of $54.84 over the near-term.
Fundamentals vs. Geopolitics: The Tug-of-War Between Oversupply and Global Uncertainty
Essentially, it’s the classic “known versus unknown” battle. The known is the bearish fundamentals highlighted by the oversupply situation. The unknown is geopolitics. Will the U.S. escalate the seizures of Venezuelan oil? Will Ukraine continue to pound Russian infrastructure? How are the sanctions against Russia impacting production? These are the questions creating some of the uncertainty encouraging the short-sellers to lighten up on the downside.