Crude Oil Price Update – Bumping Up Against Series of Former Tops at $66.16, $66.89 and $68.37

March West Texas Intermediate crude oil futures reached a three-year high last week as investors continued to react to the OPEC-led production cuts and the tenth straight week of U.S. crude oil inventory drawdowns.

The biggest influence on the market, however, was the weaker U.S. Dollar. The steep drop in the dollar to a three-year low helped drive up demand for dollar-denominated crude oil.

Despite the bullish foundation, some traders are raising concerns over increased U.S. production which could hit 10 million barrels per day in the very near future and a potential drop in demand due to seasonal factors like refinery maintenance.

Weekly Technical Analysis

The main trend is up according to the weekly swing chart. However, due to the prolonged move up in terms of price and time, crude oil begins the week in the window of time for a potentially bearish closing price reversal top.

On Friday, the market closed slightly below the June 10, 2015 top at $66.16 after taking it out earlier in the week.

The rally to $66.66, however, fell short of the May 12, 2015 main top at $66.89. This is a possible trigger point for a surge into the February 3, 2015 main top at $68.37.

The market is also trading inside a major retracement zone at $64.11 to $70.17. Trader reaction to this zone will determine the longer-term direction of the market.

Weekly Technical Forecast

Based on the price action late last week, the direction of the WTI crude oil market this week is likely to be determined by trader reaction to $66.16.

A sustained move under $66.16 will indicate the presence of buyers. This could drive the market into $66.89. If upside momentum continues to build then look for the rally to extend into $68.37.

A sustained move under $66.16 will signal the presence of sellers. If this move gains traction then look for a possible acceleration into the major 50% level at $64.11. Taking out this level with conviction will threaten the bull market.