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Trends & Analysis
News

Crude oil dips for 3rd session after supply data

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Buy the JPMorgan dip?

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Asset Watch

Should you bet on higher crude oil prices?

Saturday, January 6, 2024

While several assets have experienced bull markets over the last few months, it was a sombre holiday season for crude oil. But with the recent consolidation showing signs of technical strength, optimism could reign in the months ahead.
Crude continues to hold its 200-week moving average, and the $70 area has been a solid buy zone since March 2023. More importantly, crude experienced a sharp sell-off in late 2018, and after recouping its 200-week MA, it remained range-bound until early 2020 (the pandemic plunge), with the 200-week MA acting as support. As a result, buying near the level proved profitable for the optimists.
If a similar outcome unfolds this time around, the risk-reward of owning crude could be skewed in the bulls’ favour, as the potential upside could exceed the downside. To manage risk, it’s prudent to monitor the hourly chart.

Crude’s 50-hour MA is near $72, which closely aligns with the 200-week MA near $71. So, if the contract holds above the key levels, the outlook remains constructive, and a long position may be justified.

Traders also often price in seasonal demand ahead of time. While winter has just begun in many regions, warmer weather should boost crude demand in the months ahead, and the price should reflect that optimism as time passes.

Will crude see $80 before it sees $60, or does the recent bear market have more room to run?


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