crude oil

$25.00 Is The Key Number For WTI Crude Oil

Posted Wednesday, March 25, 2020 by
Shain Vernier • 1 min read

The weekly crude oil inventory cycle is in and supplies-on-hand missed projections. Earlier, the Energy Information Agency (EIA) reported a build of 1.623 million barrels, falling short of estimates (2.774 million) and last week’s release (1.954 million). Energy bulls have enjoyed the news and driven May WTI crude futures back to the vicinity of $25.00.

2020 has been a rough year for crude oil, with values being cut in half since January. The Russia/Saudi price war and COVID-19 outbreak have brought serious demand-side questions. These concerns have prompted North American shale-oil companies to cut production in a big way. Rigs in operation are down significantly, as is output. Barring government subsidies or an end to the OPEC+ price war, we may see EIA supply statistics hold relatively stable throughout the summer months.

For now, $25.00 is the key number for May WTI futures. Let’s dig into the daily technicals and see if there is a light at the end of the tunnel for WTI crude.

WTI Tests And Fails At $25.00 

For the past week-and-a-half, the $25.00 handle has been the premier level for May WTI futures. The area has been defined by heavy two-way participation and choppy price action.

May WTI Crude Oil Futures (CL), Daily Chart

Here are the levels to watch for May WTI in the near future:

  • Resistance(1): Psyche Level, $25.00
  • Resistance(2): 38% Retracement, $26.70
  • Support(1): Psyche Level, $20.00

Bottom Line: In the event we see May WTI break above $25.00, a shorting opportunity may come to pass. As long as $20.52 is the bottom of this market, I will have sell orders in the queue from $26.68. With an initial stop loss at $27.09, this trade yields 41 ticks on a standard 1:1 risk vs reward ratio.

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