Oil has been on a tear since dipping in August. Will the break of swing ‘highs’ bring on more buyers and keep the momentum going?
Upside Momentum Break in Oil?
The last time we looked at oil in August, the market was in bear mode as worsening pandemic conditions had fundamental traders pricing in the potential for falling demand, while technical traders were seeing bearish reversal patterns.
Oil eventually did make an extended move lower, but quickly found support around the March and April lows around $60.00 at the end of August as demand speculation improved on positive vaccine news and after Hurricane Ida passed through the Gulf of Mexico.
Since then, oil has been on a tear higher, now finding support on the emerging energy crisis that is driving natural and oil demand higher, especially in China and Europe. And today, oil bulls got that extra boost after OPEC decided to stick with their plan of raise production to 400K barrels per day. Traders were thinking we could see a bigger production boost given the current energy situation, so it’s understandable that we saw a pop in oil after the decision today.
So, it’s a pretty simple setup for you longer-term CFD and futures traders out there: we’ve got a swing high break on oil that could draw in both technical momentum players as well as fundie players who think the current supply shortage/high demand will last.
And if that’s the case, a move to $85.00 could be in the cards within the next week or two, where we could see potential resistance as that area was the major support level back in 2011.
What do you guys think? Is this the next leg higher in oil? Or will the energy situation improve and turn this break out into a fake out?
