WTI price action
Crude price rally became a major surprise for many fundamental analytics due to unexpected combination of several factors. Crisis in Venezuela and supply outages, US sanctions affecting Venezuelan and Iranian production, strong factor of US shale oil and OPEC’s spare capacity that offers a “supply reserves” – all those factors contribute into contradictory supply side dynamics.
But the real surprise is at demand side. Demand in China is growing at a stronger rate than expected and the rally on stock markets also stimulates the hopes for global economic recovery – at least for now. Exactly this strong current demand made oil rally possible.
From technical perspective, this rally looks quite logical. From Dec 2018 lows, the price made strong bounce and rally continues as there were no strong resistance clusters on its path. However, the daily charts suggest the price is already approaching the resistance area – and apparently it is the area 61.50-62.75 that serves as immediate target.
I assume rally will continue and will slow down at around 61.50. I would refrain from entering longs at the moment, instead will wait for possible correction towards support at 57.10 and perhaps even for the deeper correction at 55.80. Those are safer entries.
When price is at 61.50 however, I would start entering tactical shorts, scaling into position all the way up to 62.00-63.00. The rally rejection at this level is very much likely.
Have a nice day,