WTI Crude Oil prices started the week finding support at 99.00. Since then, price has been in a sharp rally against a bearish move from about 107.50 to 99.00.
During the 7/17 session, we had 2 major geopolitical events that put the global markets in risk-off mode, at least in the near-term.
When news broke about the Malaysian airplane shot down by an anti-aircraft missile from the ground in Ukraine, there was indeed a sell-off in equities, and an accompanying surge in oil prices. The passenger airplane was apparently flying over an area where rebels in Ukraine shot down transport planes in the past week. The facts are not all there yet, but are so far pointing to these rebels as the culprit.
The second key geopolitical event is Israel’s ground strike in Gaza. The Israeli government reported that this attack is aimed at destroying a tunnel that Hamas has built to provide an underground military access to Israel. Although the target is suppose to be sparse in population, Hamas has already issued a statement of retaliation, so we can expect some elevated fighting in this region.
Oil rallied to 103, where sellers were waiting, and we saw price fall back to 102 briefly after the US session ended.
However, price was supported above 102, and this week’s rising trendline, as well as the 200-hour SMA. These are signs that oil price is still bullish, though we might still see some consolidation in the 7/18 Asian session.
While these events should not cause a disturbance to oil supply, risk-off trading CAN push oil prices up, but this is not likely to last as long as when positive demand causes the rally.
Therefore, when you look at the daily chart, you see where you might want to limit the bullish outlook. The 104.50-105 area is a key common resistance, and if price approaches this area, look out for sellers, back toward the 100-100.25 area
Also note that if the daily RSI reading approaches 60, and stalls, we should get ready for a bearish attempt. Basically, oil prices started to look bearish as the RSI dipped to 20. Then if the daily RSI reading holes below 60, then the bearish momentum is maintained, and we would have another clue for the bearish outlook.
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