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James Hyerczyk
WTI Crude Oil Brent

U.S. West Texas Intermediate crude oil futures weakened on Friday while posting an inside move. The chart pattern suggests investor indecision and impending volatility. Sometimes the pause indicates the market is transitioning from bullish to bearish.

Keeping a cap on gains were concerns that a spike in new COVID-19 cases would put a dent in fuel demand, growing concerns about rising U.S. output ticking up while crude stockpiles sat at record highs, and worries over escalating tensions between the U.S. and China that could end the Phase One trade deal. Underpinning prices were optimism over rising road traffic boosting fuel demand.

At 20:49 GMT, August WTI crude oil is trading $38.19, down $0.53 or -1.37%.

Daily August WTI Crude Oil

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum has been trending lower since the formation of the closing price reversal top on June 23.

A trade through $41.63 will negate the closing price reversal top and signal a resumption of the uptrend. A move through $34.66 will change the main trend to down.

The minor trend is down. A move through $37.08 will indicate the selling pressure is getting stronger.

The main retracement zone is $37.50 to $41.56. This zone is controlling the longer-term direction of the market.

The minor range is $41.63 to $37.08. Its 50% level or pivot at $39.36 is resistance.

The short-term range is $34.66 to $41.63. Its 50% level at $38.15 is another potential support level.

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Short-Term Outlook

On Tuesday, the August WTI crude oil futures contract posted on potentially bearish closing price reversal top on the daily chart. On Friday, a weekly closing price reversal top was formed.

The daily/weekly closing price reversal top chart pattern combination is a strong sign that the selling is greater than the buying at current price levels.

Crossing to the weak side of the Fibonacci level at $37.50 will be the first sign of weakness. Taking out the low at $37.08 is likely to trigger the start of an acceleration to the downside.

Another trigger point is the main bottom at $34.66. Breaking this level could lead to an eventually test of the 50% level at $30.96.

Essentially, it all comes down to how traders react to the major 50% level at $37.50 next week.

For a look at all of today’s economic events, check out our economic calendar.

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