I can say that with confidence because I have talked to headline traders stuck in $110 oil since March 9. Traders who held on and bought more down at $76.00 and are now sitting in oil at an average price of $93.00. Well maybe that’s why it hovers around 50% to 61.8% levels like $94.53 to $98.98 so long. These types of traders are all scrambling to get out at breakeven so they can tell the boys at the club that they traded in the crude oil market during the great U.S.-Iran War of 2026.
The Retracement Zone Is Where the Real Battle Is Being Fought
Getting back to the May WTI crude oil futures market. Yes, we’ve seen a lot of trading activity inside this retracement zone at $94.53 to $98.98. Maybe the market is holding this zone because of position-squaring, or maybe the fundamentals are saying supply and demand is balanced there. The point is, this should be your area of focus because I believe that trader reaction to this zone will determine the near-term direction.
Also coming into play by virtue of this week’s sideways trade is the trend line at $89.22 today. Holding this support line will have the same impact as holding the retracement zone. It will represent that there is a buyer in there defending the potential for a rally against a steep decline.
Know Your Exit Before You Enter
If it fails, however, then conditions will get more interesting because at that point, traders will begin to ask why. Why didn’t it go up from here? Is it going down because the rally is over, the war is over, the Strait of Hormuz is opening? Are the hedge funds dumping crude to drive out the weaker longs and to re-enter at a better price? These are all valid assessments of the situation.
As I said earlier, know your exit first. If you’re long because of the trend line, then be gone if the trend line fails as support. The same goes for any technical level you used to go long or go short. Don’t mix and match because you’ll eventually buy a breakout over $100 and set a tight stop, then change it and rationalize the uptrend with the 50-day moving average at $69.53.
Bottom Line
I still like the long side of the crude oil market, but let’s just say I’m cautiously bullish at current price levels, but then again, I watch this market every day and saw the original breakout on March 2. My risks are controllable at this point. If you’re thinking of buying at current price levels and hoping for the mother of all breakouts that take crude oil to $150 or $200, you don’t need a gigantic stop loss to rationalize the risk and reward. Just remember if you buy on momentum then exit when the momentum changes. Don’t wait for the big headline to tell you you’re wrong.
