Crude Oil Price Update – 50% Level at $46.52 Controlling the Trade

October West Texas Intermediate crude oil futures are trading flat on Tuesday shortly before the regular session opening. The market is trading inside yesterday’s wide range, suggesting investor indecision and impending volatility.

Due to the shutdown of most major refineries in the Houston-Gulf of Mexico Coast area, demand is plunging in crude oil to the tune of about 1.4 million barrels per day. Prices are likely to remain under pressure as long as the refineries are closed.

We could see a short-covering rally if officials announce the opening of any refineries. However, since traders have probably priced in a short-term event, prices could plunge once again if the refineries remain closed for weeks.

Technical Analysis

The main trend is down according to the daily swing chart. The trend turn down on Monday when sellers took out the last swing bottom at $46.62. If the selling extends through this bottom then the next key target will be the July 24 main bottom at $45.58. This is followed by the July 10 main bottom at $44.01.

The main trend will turn up on a trade through $48.91.

The main range is $42.52 to $50.51. Its retracement zone at $46.52 to $45.57 is the primary downside target. This zone is currently being tested. It’s controlling the longer-term direction of the market.

Forecast

Based on the current price at $46.54 and the earlier price action, the direction of the crude oil market today will likely be determined by trader reaction to the 50% level at $46.52.

A sustained move over $46.52 will indicate the presence of buyers. This could trigger a strong rally into the nearest resistance angle at $48.01. We could see a technical bounce on the first test of this angle, but it is also the trigger point for an acceleration into the main top at $48.91 and the next downtrending angle at $49.26.

A sustained move under $46.52 will signal the presence of sellers. The first target will be yesterday’s low at $46.15, followed by a support cluster at $45.57 to $45.52. We could see a technical bounce on the first test of $45.57 to $45.52, but if it fails then look for the selling to extend into the next major uptrending angle at $44.02. This is the last potential support angle before the $42.52 main bottom.