Crude Oil Price Forecast: Weakens After Weekly Reversal Triggers

Crude oil fell to a low of $65.56 on Tuesday, as it again tested a key support zone. Although the support zone has been held it is being seriously tested. Sellers remain in charge at the time of this writing, with trading continuing near the lows of the day. The day’s high of $66.96 was a successful test of resistance at a lower uptrend line, a minor bearish sign.

Monthly support was broken as a four-week low below $65.63 was reached, another bearish sign. In addition, last week completed a bearish shooting star pattern with a weekly close in the lower half of the week’s trading range.

Weekly Breakdown Triggers

A potential bearish scenario includes a breakdown from the weekly shooting star triggered today with a drop below July’s low of $65.95. And it looks like the breakdown will confirm with a daily closing price below that level. As noted above there is a key support zone being tested currently from around $65.64 to $64.46.

The range begins with an anchored volume weighted average price (AVWAP) line from April trend low and ends at a 61.8% Fibonacci retracement level of $64.67. This is only a guide and approximation for potential support. Also, included within the price range is the neckline from a double bottom bullish reversal pattern that broke out on June 11. That is a price area that led to reversals several times previously.

Remains in Declining Channel

Overall, crude oil remains in a downtrend, and it has been weakening since the June spike high and bearish reversal from around the top of a large falling trend channel. The lower channel line was successfully tested as support with the low in April. That low was followed by a rally that eventually tested resistance at the top of the channel.

A lower swing high completed last week, showing downward pressure on prices. Despite the potential for support down to $66.67, a decisive drop below that level is likely to lead to lower prices. However, crude oil would be falling toward a large range of potential support that could slow a decline.

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