If you are a crude oil trader, this has been a slow and painful grind to the upside. However, during the trading session on Tuesday we have seen a rather bullish candlestick that could give a little bit of a “heads up” as to where we are going next. While I have suggested that we were going to go higher over the longer term, and we will certainly have been grinding higher, the candlestick from the Tuesday session is closing at the top of the range, something that shows a bit more confidence then we have seen recently.
Lately, I have been telling people who follow me that they are better off “buying the dips” in the oil market, especially on short-term charts. Scalpers have made a killing in this type of environment, as the market is moving in so-called “micro-movements.” However, a few things have happened that changes the overall outlook in the market.
Obviously, tropical storms come into play and therefore the fact that we have to hitting the Gulf of Mexico at the same time is a sign that we could be seen a bit of a disruption in production. In fact, 45% on production is already knocked out, although it is from a temporary standpoint. Beyond that, we also have the shrinking US dollar which drives up the value of commodities in general, and it means that there will be more greenbacks needed to buy a barrel oil.
From a technical side, we are above the gap, and now firmly above the 200 day EMA as pictured on the chart below. There was a major sell off from the $49 level that should continue to offer supply, and I think that is our target. This does not mean that you cannot buy on dips, simply that we can start to think about holding onto a trade for more than just a few hours. With everything coming into play, and the fact that Jerome Powell speaks on Thursday, we could have several catalyst to go higher.