Crude Oil Price Update – Chart Pattern Suggests Investor Indecision, Impending Volatility

January West Texas Intermediate crude oil futures are trading flat shortly before the regular session opening. The market is being underpinned by continuing supply cuts and expectations that they will continue beyond the initial March 2018 deadline. Concerns over increased U.S. production is helping to limit gains.

Later today, investors will get the opportunity to react to the latest rig count report from Baker Hughes. Due to the relatively high prices, we could see an increase in the number of operating rigs in the U.S. This could put pressure on prices.

Daily Technical Analysis

The main trend is up according to the daily swing chart. However, Wednesday’s closing price reversal top is indicating a potential shift in momentum to down.

A trade through $58.14 will negate the chart pattern. This will also signal a resumption of the uptrend. A trade through $56.65 will confirm the closing price reversal top. This could lead to the start of a 2 to 3 day correction, or a 50% to 61.8% retracement of the last rally.

The market is also posting its second straight inside move which suggests investor indecision and impending volatility.

The short-term range is $58.14 to $56.65. Its 50% level or pivot is $57.40. The market is currently straddling this level. It is controlling the direction of the market today.

The main range is $51.09 to $58.14. If there is a correction then its retracement zone at $54.62 to $53.78 will become the primary downside target.

Daily Technical Forecast

Based on the current price at $57.39 and the price action the last two days, the direction of the WTI crude oil market today is likely to be determined by trader reaction to the short-term pivot at $57.40.

A sustained move over $57.40 will indicate the presence of buyers. If this creates enough upside momentum then look for a test of $58.14. A move through this price level will turn the market bullish again but the breakout must be accompanied by rising volume or the move will fail. This could produce another closing price reversal top.

A sustained move under $57.40 will signal the presence of sellers. The first target is $56.65.

If $56.65 is taken out with conviction then look out to the downside since the next major target zone is $54.62 to $53.78.