Brent Crude Oil Price Update – Getting Close to Erasing Nearly 3-Year Rally

Based on the early price action, the direction of the March Brent crude oil market on Wednesday is likely to be determined by trader reaction to Monday’s close at $50.77.
James Hyerczyk
Crude Oil
Crude Oil

International-benchmark Brent crude oil futures are trading lower early Wednesday as investors return from the one-day holiday. Volume is below average and volatility is low. Both factors could remain under pressure until after the New Year’s holiday. The risk-off scenario in the stock market is helping to drive prices lower during the pre-market session. Traders also continue to express doubts that the OPEC-led production cuts, due to begin on January 1, will have any impact on the global supply glut.

At 0732 GMT, March Brent crude oil is trading $50.47, down $0.30 or -0.59%.

Daily March Brent Crude Oil

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. Today’s early weakness reaffirmed the downtrend. The main trend will change to up on a move through the last main top at $63.91.

Although a change in trend is highly unlikely, the market is in the window of time for a potentially bullish closing price reversal bottom because of the prolonged move down in terms of price and time. If successful, this move could trigger a 2 to 3 day counter-trend rally.

Daily Swing Chart Forecast

Based on the early price action, the direction of the March Brent crude oil market on Wednesday is likely to be determined by trader reaction to Monday’s close at $50.77.

Bullish Scenario

Given the prolonged move down in terms of price and time, and today’s lower-low, recapturing Monday’s close at $50.77 will indicate the return of buyers. This move will put the market in a position to form a daily closing price reversal bottom. This could trigger a strong intraday, counter-trend rally with the first upside target Monday’s high at $54.88. Taking out this level will form a new minor bottom.

A close over $50.77 will produce a daily closing price reversal bottom. If confirmed on Thursday, this could trigger the start of a 2 to 3 day counter-trend rally.

Bearish Scenario

A sustained move under $50.77 will signal the presence of sellers. If this move creates enough downside momentum then look for the selling to extend into the June 21, 2017 main bottom at $49.16. If this level fails to hold as support then look for a further decline into the April 5, 2016 main bottom at $47.28.

The latter is the trigger point for a potential acceleration to the downside with the January 20, 2016 bottom at $42.99 the next significant bottom. This price is important because it launched the nearly three year rally in crude oil.

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