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Asset Watch
Wednesday, January 15, 2025
After months of disappointment for the energy bulls, the script has seemingly flipped in recent days. With Big Tech under pressure and crude oil basking in the glory, resilient economic data has created a bid for the ‘revenge of the real economy’ assets.
But, can crude continue its climb, or is this just another short squeeze?
With geopolitics adding further fuel to crude’s rally, Reuters reported on Jan. 12 that fresh U.S. sanctions on Russia could result in Chinese and Indian refiners sourcing more oil from the Middle East, Africa, and the Americas.
An Indian oil refining official stated, “Already, prices are rising for Middle Eastern grades. There is no option and we have to go for Middle Eastern oil. Perhaps we may have to go for U.S. oil as well.”
Consequently, with Russian curbs poised to decrease supply, higher prices may continue as the drama unfolds.
With crude stuck in a range of roughly $67 to $74, traders were quick to exit their positions when the price reached the upper bound. However, after smashing through the breakout level last week, $74 may become the new floor en route to $80+.
Because crude is highly volatile, you should pay close attention to the 20 and 50-hour moving averages to gauge the strength of the uptrend. If you analyse the blue and yellow lines, you can see that the pair often act as key support levels when higher highs occur.
As a result, the outlook is bullish as long as crude trades above both metrics.
To ride the momentum and limit drawdowns, placing a stop-loss order slightly below the 20-hour MA could be wise. Keep in mind that both MAs will shift considerably as the days pass because the data is from an hourly chart.
As such, the sooner the 50-hour MA catches up to the 20-hour MA, the more allies crude should have for continued strength.
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