Oil prices are soaring. Here’s how they get to $100 and beyond.
Oil prices rose in 2022, reaching multi-year highs.
So far, crude oil prices are up more than 21% on the year, easily outpacing the S&P 500 and other major US stock markets.
In a world where inflation continues to climb, so does oil. And he has the reopening world as a catalyst.
I noticed that while stock markets were hitting new lows in late January, that was not the case across the board.
Airlines like Delta Air Lines (DAL) – Get the report from Delta Air Lines, Inc. and United Airlines (LAU) – Get the report from United Airlines Holdings, Inc. were not making new lows. Neither is Wynn Resorts. (WYNN) – Get Wynn Resorts, Limited Report or the sands of Las Vegas (LVS) – Get the Las Vegas Sands Corp report.. Cruise stocks like Royal Caribbean (RLC) – Get the Royal Caribbean Group Report and Carnival (CCA) – Get the Carnival Corporation report also held.
It was interesting, because the stock market was getting pounded and as the number of Covid-19 cases exploded due to the Covid omicron variant.
The market speaks and says that the economy will continue to reopen this year. This bodes well for oil.
Crude oil trading
Looking at the Crude Oil chart, I can’t help but notice how wonderful this uptrend has been.
Its short-term moving averages continue to guide it higher as oil prices have soared and risen steadily since mid-December lows.
Oil easily broke through the key $85 level, an area I would like to keep an eye on. Why? Because it can very well go from an earlier resistance to current support.
Additionally, should the correction come soon, the 21-day moving average also comes into play near this area. But that would require quite a short-term correction.
Instead, I will continue to look for the 10-day moving average to guide oil higher, while looking for support in the $88-89 area.
On the upside, the 161.8% extension of the current range comes into play at $99.61. At that point, we’re talking about a $100 oil price. If we expand beyond that, we might be talking about $108 and then $122.
I don’t know if we’ll get there — at least in the short term — but those are the levels to know.
Another thing to consider is energy actions. Almost every sector is down so far in 2022. Financials are up 3% and energy stocks are up more than 20%, as is oil.
I am not saying that this group can continue to generate 20% gains per month or that it will not back down. But for now, they are the relative strength leaders for the trade.