WTI Oil – Still Bullish, Just a Little More Complicated

 

Hi everyone,

I've been watching WTI over the past few days, and I thought I'd share a few things that have been on my mind. Despite the recent drop, I haven't really changed my view on oil. I'm still leaning bullish, although I think we might have a few more bumps along the way.

As you know, WTI dropped quite sharply from around $104 to $86.60. That's a pretty big move, and I don't think it was just about some technical resistance at $104.

The timing is interesting too. The sell-off came around the Democrats' big win in the US midterm elections. My feeling is that traders started thinking there might be a different approach to Iran, perhaps with less tension in the Middle East. And when the risk of conflict goes down, some of that extra premium in oil prices tends to disappear as well.

But here's the thing. Since hitting $86.60, oil has been slowly climbing back. And looking at the bigger picture, I still don't think the bulls are finished.

So, what's going on with Iran?

This is where things get a little confusing, isn't it?

Almost every day, we hear Trump telling us that negotiations are going well, that progress is being made and that everything is looking promising.

Sounds great, right?

But then we look at what's actually happening in the region. Military preparations are continuing, there are reports about USS Theodore Roosevelt heading towards the area, and there's still talk about another possible US strike against Iranian nuclear facilities.

So, which story are we supposed to believe?

Personally, I think this is one of the main reasons why oil has been jumping around so much lately. One moment we hear something positive about diplomacy, and the next moment there's another sign that things could get much worse.

Of course, I'm not saying an attack is definitely coming. I have no crystal ball, unfortunately. :)

But I think we should remember one important thing. For oil prices, it's not really about what happens to Iran's nuclear facilities. It's about what Iran might do afterwards.

A possible response against energy infrastructure in the region, or any serious trouble with shipping through the Strait of Hormuz, could change the whole situation very quickly.

And that's why I'm still being careful about getting too bearish on oil.

Now, let's have a look at the charts

Starting with the daily chart (D1), I'm still watching that big rising channel we've had since the July lows around $66.

Yes, we've broken out of the smaller rising channel, and the recent drop certainly wasn't pretty. But I don't think that means the whole bullish picture is gone.

What I find encouraging is what happened around $86.60. After such a sharp fall, buyers finally stepped in, and we've managed to get back towards $90.

Still, I'm not expecting oil to shoot straight back to $104 tomorrow.

Actually, I wouldn't be surprised if we first went back to test the area where we broke out of that rising channel on D1. That's something I've been expecting for a while, and I still think it makes sense.

I'm really curious to see what happens there. Will sellers show up again, or will buyers manage to push through?

That reaction could tell us quite a lot.

On the H4 chart, things are a bit less encouraging. We've lost the previous rising channel, and we're also trading below the SMA200, which is currently around $94.90.

Not exactly what bulls want to see.

On the other hand, since the $86.60 low, price has started forming a small rising channel again. Nothing spectacular yet, but at least buyers are showing some interest.

For now, I'm watching the $94–95 area. If we can get back above it, I'll feel much more comfortable about this recovery.

After that, there's still the $99–102 area to deal with, and of course those previous highs around $104–105.

And if we go the other way? Well, $86.60 is still very important to me. If that level gives way, I'll have to reconsider my bullish view.

What do I think happens next?

Well, I still think we could see that retest of the former D1 channel boundary before anything really interesting happens.

And to be fair, I wouldn't mind that at all. I'd rather see a proper test and a clear reaction than chase the price after a few green candles.

As for the fundamentals, I think they're about as mixed as they can be right now.

On one side, we have Trump talking about successful negotiations and the possibility of a diplomatic solution. On the other, we have military preparations that are pretty hard to ignore.

And oil is stuck somewhere in the middle, reacting to every new headline.

My view hasn't really changed. I'm still cautiously bullish, but I'm also prepared for another pullback or some sideways movement before we get a clearer direction.

A lot will depend on what happens with Iran, of course. If diplomacy actually works, that's one story. If things escalate, we could be looking at something completely different.

For now, I'll keep watching that old daily channel boundary. I have a feeling it could be quite important in the coming days.

Anyway, that's how I see it at the moment. As always, it's just my personal view, and I could be wrong. That's part of trading, after all. :)

Have a great weekend, everyone, and good luck with your trades!

Lukas