Crude Oil Price Update – Contrarian View: Deluge of Bullish Articles Tips Market Lower

Did you feel it? No, I’m not talking about an earthquake but the plethora of bullish crude oil articles that hit the financial websites earlier today. Wow, the Masters of the Obvious were out in full force after OPEC+ extended the production cuts deal. And guess what, after an early session rally, the crude oil markets reversed lower.

This reversal top could be a significant sign of a short-term top because it occurred inside a major 50% to 61.8% retracement zone after a prolonged move up in terms of price and time. Usually, these types of tops occur 7 to 10 days from a main bottom.

Today’s closing price occurred 7 sessions from the $31.14 main bottom and 28 sessions (4 times 7) from the $17.27 main bottom.

Higher-highs and lower-closes occur frequently, but a higher-high, lower-close, close below the opening and close below the mid-point of the trading session is my favorite type of closing price reversal top.

The pattern draws your attention, but it’s the follow-through selling that actually confirms the chart pattern. If confirmed, we could see the start of a 2 to 3 day correction. Often it’s 50% of the recent upswings.

If our contrarian indicator is accurate then the market has probably have formed a short-term top. Remember at the bottom, all the articles explaining how bad the U.S. oil market was after May crude oil fell below $0.00? Think the opposite now.

All hail to the grinders. The analysts and traders who write about and trade crude oil every day, good or bad, right or wrong. They know when the bandwagon gets too crowded. They know when it’s time to fade the bulls.

Let’s see if it works out this time. Remember, if wrong, take the small loss and get ready to grind the other way.

At 19:15 GMT, July WTI Crude Oil is trading $38.25, down $1.30 or -3.29%. This is down from a two-month high at $40.44.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was confirmed early in the session. However, the market is in a position to close lower for the session, which could be an early sign of a shift in momentum to the downside, but not necessarily a change in the trend to down.

The main trend will change to down on a move through $31.14. A trade through $40.44 will negate the closing price reversal top and signal a resumption of the uptrend.

The main range is $54.86 to $17.27. Its retracement zone at $36.07 to $40.50 is controlling the longer-term direction of the market. Monday’s rally stopped at $40.50, just short of the Fibonacci level.

The first short-term range is $31.14 to $40.44. Its 50% level at $35.79 is a potential downside target.

The second short-term range is $17.27 to $40.44. Its retracement zone at $28.86 to $26.12 is the primary downside target and potential value zone.

Short-Term Outlook

We’re going to be watching trader reaction to Monday’s low early Tuesday. Taking out this level will confirm the previous session’s closing price reversal top. This could trigger a 2 to 3 day break with $36.07 the first target, followed by $35.79.

If there is no confirmation of the closing price reversal top then we could see a quick recovery to the upside and a retest of $40.44.

Taking out $40.44 and $40.50 will indicate the buying is getting stronger. This could trigger a further rally into $41.88, filling in the gap from early March.