WTI bulls: It’s make-it or break-it time
Last Wednesday, Nymex WTI crude oil broke down through significant support in the mid $90s as the euro €/U.S. $ cross broke through the 1.4342 “cloud” on the Ichimoku pattern. Then on Friday spot WTI crashed nearly $4 (peak-to-trough) to 91.84, in spite of a 0.7% decline in the U.S. $ against the euro €.
This event should be of concern for those looking for a rebound in oil. The mid $90s had been an area that attracted buying interest ever since Middle East experts began incorporating the contagion noun in their repertoire back in February.
As far as this week goes, look to the greenback. On Friday the euro €/U.S. $ cross bounced back to 1.4306. This week the Ichimoku “cloud” maxes out at 1.4365. Failure to incite a sustained bid through this area clears a path towards the 1.400 psyche-critical reference point.
In this vein, we affirm our guidance in last Thursday’s issue of The Schork Report…if the euro fails at 1.400, we think that will clear the path towards the “gap” …which is the area in between the 89.77 low print from Monday, February 22nd to the 87.88 high print from the previous Friday, February 18th.
Bottom line, we think that further U.S $ dollar strength will lead Nymex WTI into the high $80s. Whether that occurs with today’s penultimate contract for July delivery, or the second month out August contract, remains to be seen.
Either way, we are advising our clients that we will be buying into weakness below $90.
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Stephen Schork is the Editor of The Schork Reportand has more than 17 years experience in physical commodity and derivatives trading, risk systems modeling and structured commodity finance.