Oil Ready to Test Highs
Oil is too close to last year’s highs right now to not trade there. With oil currently at around $75, it will most likely head to $80/barrel before hitting $70/barrel. When commodities move one way, they typically stay that way until some type of technical break down or exhausting buying climax reverses the trend. When it comes to commodity or oil trading, especially in the short term, it seems that technicals drive price action and fundamentals take a back seat. Right now, we have oil inventory above the five year average, which means we have plenty of supply; yet, oil continues to want to go higher.
The main reason I believe oil will go to $80 before $70 is because last years trading and closing highs were just under $80. As a technical trader, you don’t want to sell until the next strong resistance level, which now happen to be last years high at around $80/barrel. Most money managers and oil investors are still bullish and will remain so until oil tests its previous highs. That means there’s a lack of selling pressure.