Crude oil has reached our upside target around $41-42/barrel area and struggling to make further gains. Prospect of a downfall from here also moved up, however there are still no concrete signs yet that crude could falter from here.
Moreover fundamentals hasn’t improved much for crude, despite recent production freeze by countries like Russia, Saudi Arabia. Supplies are still at large and demand growth in 2016 likely to be weaker than 2015. So recent rally is more due to short covering and increase in bullish bets by hedge fund.
However, there do exits a case for not shorting crude at least yet.
As Dollar has strengthened over last six trading days, Crude has faltered in five of them, yet North American benchmark, West Texas Intermediate (WTI) hasn’t broken below the lows made on Thursday around $38.3/barrel area.
This week, Dollar has started weakening again and if it goes down further, Crude might find some support in it, which may keep it buoyed in the near term, if not pushed into new heights.
Best strategy here would be wait it out for the right moment and let the noise clears out before next directional move. However long positions may be covered as first target has been reached.
Key levels to go long and short in WTI, are above $40.4/barrel and below $38.3/barrel.
WTI is currently trading at $38.8/barrel.
The material has been provided by InstaForex Company – www.instaforex.com