The West Texas Intermediate Crude Oil market rallied early on Tuesday as we continue to see upward momentum. That being said, we did give back a little bit during the day and the market may need to pull back in order to find a bit of footing to continue the upward momentum. Keep in mind that the market has just broken out of a major triangle, so a lot of people will be paying close attention to that.

When a market breaks out of an area that is as obvious as this one was, there tends to be a lot of short-covering, as well as people jumping in to take advantage of “FOMO.” I do think that crude oil will continue to go higher based on energy demand with the reopening of trade and the situation in Ukraine deteriorates. There seems to be no real chance of peace, so the Russian oil supply will continue to be a major concern. As long as that is the case, there will be a lot of people out there willing to buy crude oil.

All of that being said, there is an argument to be made for buying dips, as the $110 level should offer support based upon not only psychology but the fact that it has been structurally important a couple of times in the past. The market will probably need to find a reason to pull back, even if it is just simple profit-taking. Markets are extraordinarily volatile right now, so do not be surprised at all if we get some type of massive move lower, followed by a rip higher.

Alternatively, we could break above the top of the candlestick for the trading session on Tuesday which would be bullish in and of itself. At that point, the market could very well go looking to reach the $120 level, which would be my longer-term target. Obviously, market participants continue to be very skittish, so you cannot go “all in” into anything, let alone something as volatile as crude oil. It is more likely than not we will continue to make a fresh, new high, but that does not mean that we go straight up in the air. Keep in mind that you should be looking for value on dips, as they should continue to appear.

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