By FXEmpire.com
The light sweet crude markets broke out during the Thursday session as the bullish traders took over. The $90 level was the beginning of massive resistance up to the $91 handle or so, and the fact that we broke above it is in fact a significant signal indeed.
We’ve been looking for a breakout above this area in order to go along of the light sweet crude market, and as such we are now in that position. We wholly believe that the $100 level will be tested again, but will be taking profit at that point in time and unless something changes fundamentally. Simply put, we think this is yet another round of “hopium” in the financial markets as traders are speculating that the Federal Reserve will start easing again.
In reality, the supply and demand curve of the oil markets is very weak. There simply is not enough industrial output around the world, let alone demand for those goods in order to push petroleum usage very high. We think that as long as this is the case, the rallies will be fueled basically upon monetary policy rather than the underlying fundamentals of crude oil markets. With this being said, when you get this type of rush you will typically see everybody leave the trade at the same time. This leads to wicked pullbacks, and as such this is how we feel this market will trade.
We are long for the moment, but fully expect to be out of this market at the $100 level. In fact, we’re even willing to sell if we get the right week candle up at that level and reverse the present trading position. We think in the end, this is the summer months and this will go back to its cyclical pattern of range trading over time. Granted, there’s always some type of possible risky headline out of the Middle East that can spike oil prices, but these almost always get faded right away. We feel that the only reason we are able to go long at this point in time is that there is enough room to make the reward worth the risk.
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Originally posted here
