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How High Can Oil Go?

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Regular readers will be aware that once a strong move is underway, my instincts and training lead me to forego trading with the momentum and, based on the fact that nothing moves in a straight line forever, look instead for an inflection point and play the retracement. That is usually the best tactic, as once a move is well underway, there is way too much chance of you hitting the end of the move, or at least very close to it. Sometimes though, when a move is based on fundamental factors and supported by technical analysis, the potential is such that opposing the momentum would be suicide.

WTI looks right now to be a case in point. Last week, my immediate reaction to the news from OPEC was to say that, despite the announcement being greeted by a drop in oil, it was not what it seemed and would drive prices significantly higher before too long. That turned out to be the right call, but I also said in that article that I expected that jump to position us for a newer, higher range with a top at around $75. For a combination of technical and fundamental reasons I have now changed that view and will be remaining long and looking for WTI to move a lot higher.

(Click to enlarge)

Let’s deal with the more straightforward technical case first. The last couple of day’s action has taken WTI, as expressed above by the E-Mini futures contract (QM) above, to multi-year highs. That break is confirmed by a couple of closes above the recent high, but…

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