Crude Oil Price Forecast: Key Support Zone Comes into Focus

Pullback Puts Key Support to the Test

WTI crude oil continued to weaken on Tuesday, falling to a low of $78.36 as it tested a key potential support zone. The day’s low was a successful test of support at the 20-day moving average, now at $78.62, as well as near a lower swing high of $79.23 and the 61.8% Fibonacci retracement at $77.90. However, given the conviction from sellers during the pullback from last week’s high of $94.34, it appears increasingly likely that the 200-day moving average at $76.83 may also be tested as support.

This does not mean that a test is certain, but keep in mind that the 200-day moving average is rising and getting closer to the 61.8% Fibonacci retracement zone. The Fibonacci price zone would strengthen the Fibonacci area as support if the 200-day average reaches it.

Rally Reached a Crowded Resistance Zone

Last week’s high reached an anticipated upside target zone, as it was near the lower boundary of a symmetrical triangle pattern and an interim lower swing high at $94.98. Moreover, the advance completed a 61.8% Fibonacci retracement of the prior decline at $93.69. Given the clear rejection of price from that zone this week, the $94.34 high looks unlikely to be challenged again in the near term.

Watching for Signs of a Bottom

The next assessment of price action will depend on whether signs of a bottom for the retracement begin to occur. On Tuesday, the 50-day moving average was decisively broken to the downside, with the breakdown confirmed as resistance by the day’s lower daily high of $83.04. Moreover, downward pressure remains at the time of writing, as trading continues in the lower third of the day’s range. If the session closes in a similar area, it will end with sellers in control.

That could lead to a deeper test of the 61.8% Fibonacci retracement, if not the 200-day moving average. Therefore, the $77.90 to $76.83 area remains an important downside support zone to watch, and a successful test there could provide the first meaningful indication that the pullback is beginning to stabilize.

If you’d like to know more about how commodity markets work, please visit our educational area.