Oil prices continue to roar higher, up more than 20% so far this year. Here’s how oil gets to $100 now.
Oil prices have been cruising higher in 2022, hitting multi-year highs amid the push.
So far, crude oil prices are up more than 21% on the year, easily outpacing the S&P 500 and other major U.S. stock markets.
In a world where inflation continues to climb, so too does oil. However, it has another catalyst: The reopening world.
I noticed that as the stock markets were making new lows in late January, that wasn’t the case across the board.
Airlines like Delta Airlines (DAL) – Get Delta Air Lines, Inc. Report and United (UAL) – Get United Airlines Holdings, Inc. Report weren’t making new lows. Neither was Wynn Resorts (WYNN) – Get Wynn Resorts, Limited Report or Las Vegas Sands (LVS) – Get Las Vegas Sands Corp. Report. The cruise stocks like Royal Caribbean (RCL) – Get Royal Caribbean Group Report and Carnival (CCL) – Get Carnival Corporation Report were holding up as well.
This was interesting, as the stock market was getting pummeled and as Covid-19 case counts were exploding due to the Omicron variant.
The market is speaking and it’s saying the economy will continue to reopen this year. That bodes well for oil.
Trading Crude Oil
Daily chart of crude oil.
Chart courtesy of TradingView.com
As I look at the chart for crude oil, I can’t help but notice what a wonderful uptrend this ride has been.
Its short-term moving averages continue to guide it higher, as oil prices have spiked and steadily climbed from the mid-December lows.
Oil easily pushed through the key $85 level, which is a zone I would like to keep my eye on. Why? Because it may very well shift from prior resistance to current support.
Further, if the correction were to come soon, the 21-day moving average also comes into play near this area.
However, that would require quite the correction in the short term. Instead, I will continue to look for the 10-day moving average to guide oil higher, while looking for support in the $88 to $89 zone.
On the upside, the 161.8% extension from the current range comes into play at $99.61. At that point, we’re talking about $100 oil prices. If we extend above that, we could be talking about $108, then $122.
I don’t know that we get there — at least in the short term — but those are the levels to know.
Another thing to consider is energy stocks. Almost every sector is lower so far in 2022. Financials are up 3% and energy stocks are up more than 20% — just like oil.
I’m not saying that this group can continue to generate 20% gains a month or that they won’t pull back. But for now, they are the relative strength leaders to trade.
