Bearish Breakdown Extends Momentum Lower
Crude oil weakened on Tuesday, reaching an 11-day low of $91.31 and triggering a bearish continuation of the current pullback. This behavior suggests a deeper pullback is likely to test lower support levels. A near-term uptrend line, plus the 10-day and 20-day moving averages were broken recently. The decline triggered a breakout of a rising wedge formation last Wednesday. During an initial rally in Monday’s session prior support near the uptrend line and 10-day moving average were successfully tested as resistance. The result is a continuation of a falling ABCD pattern begun from last Tuesday’s high of $118.29.
Key Support Zones Under Pressure
There are several lower price zones that traders should be aware of. The first potential support zone starts at the 50% retracement at $86.65 and the nearby higher swing low near $85.50. That lower level is part of trend structure and therefore has significance. Moreover, the 50-day moving average at $83.21 approaches that price zone and represents a key tend indicator, particularly since the 20-day moving average failed as support during the trendline break. This would be the first pullback to the 50-day line since the bull trend picked up speed in January.
Deeper Confluence Targets Emerge
If the 50-day average fails as support, there is the confluence of two indicators near $79.30. An initial 100% projection of a falling ABCD pattern completes there and it is also the 61.8% Fibonacci retracement level of the full uptrend measured from the December low.
Weekly Structure Confirms Bearish Bias
The weekly chart confirms a short-term bearish outlook as a breakdown from a weekly bearish engulfing pattern triggered below last week’s low of $91.60. That provides additional bearish evidence and on the potentially more significant higher timeframe. The clear bearish engulfing pattern at the top of a trend also suggests further selling pressure for crude oil. Therefore, the lower targets become more likely to be reached.
Resistance Defines Downtrend Control
Key resistance is Monday’s lower swing high of $105.99 (C). Downward pressure remains unless that high is recovered. However, there can be bounces back up into resistance to further test it before lower prices. That doesn’t look like the case so far, however.