Crude Oil Price Update – After Reversal Top It Strengthens Over $75.91, Weakens Under $74.93

November West Texas Intermediate crude oil futures are treading water shortly before the release of the weekly U.S. Energy Information Administration’s weekly inventories report. Volume and volatility have been below average the past two days after Monday’s steep rally.

The main story remains the potential supply shortage due to the looming sanctions on Iran. However, short-term, investors are expressing concerns over rising U.S. inventories and production.

Today’s EIA report is expected to show a 1.1 million barrel inventories build. A larger than expected build will likely put pressure on the market since some of the weaker longs are looking for any excuse to book profits.

Daily Technical Analysis

The main trend is up according to the daily swing chart. However, Tuesday’s closing price reversal top has temporarily stopped the rally. A trade through $74.93 will confirm the chart pattern. This could trigger the start of a 2 to 3 day correction.

A trade through $75.91 will negate the closing price reversal top and signal a resumption of the uptrend. There is no immediate resistance, but a longer-term target is the November 21, 2014 top at $80.10.

The minor range is $71.47 to $75.91. Its 50% target is $73.69.

The main range is $67.79 to $75.91. Its retracement zone at $71.85 to $70.86 is the major support zone.

Daily Technical Forecast

Based on the early price action, look for another surge to the upside if $75.91 is taken out with rising volume.

On the downside, look for selling pressure to begin on a move through $74.93. The first target is an uptrending Gann angle at $74.29. Watch for a technical bounce on the first test of this angle.

If $74.29 fails as support then look for the selling to possibly extend into the minor 50% or pivot level at $73.69.

The pivot at $73.69 has to hold or we could see a steep drop into the main 50% level at $71.85 over the near-term.