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Crude Oil Price Update – Downside Pressure Could Drive Market into $69.29 to $68.69

By:
James Hyerczyk
Published: May 14, 2018, 06:16 UTC

Based on the early price action, the direction of the crude oil market the rest of the session is likely to be determined by trader reaction to the major Fibonacci level at $70.60.

Crude Oil

Profit-taking ahead of the week-end drove crude oil prices lower on Friday. Long investors were also encouraged to book profits after another jump in the U.S. rig count. This raised concerns about increasing U.S. production offsetting some of the expected supply shortage caused by sanctions against Iran.

Although the market is pricing in a supply disruption, it may take months before the market actually sees the effects of the sanctions against Iran. In the meantime, there are some bearish traders who believe Saudi Arabia, Kuwait or Iraq will increase production to make up for the shortfall.

Crude oil is trading slightly lower early Monday. At 0600 GMT, July West Texas intermediate crude oil is trading $70.43, down $0.25 or -0.35%.

WTI Crude Oil
Daily July WTI Crude Oil

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum may be getting ready to shift to the downside. Because of today’s lower-low, a new main top has formed at $71.80. A trade through this level will signal a resumption of the uptrend.

The minor trend changes to down on a move through $67.57. The main trend will change to down on a trade through $66.77.

The contract 50% to 61.8% zone is $70.60 to $64.77. Holding above this zone will give crude oil a solid upside bias.

The short-term range is $66.77 to $71.80. Its retracement zone at $69.29 to $68.69 is the first downside target. Since the main trend is up, buyers are likely to return on the first test of this zone. If this zone fails then momentum will shift to the downside.

WTI Crude Oil (Close Up)
Daily July WTI Crude Oil (Close Up)

Daily Swing Chart Technical Forecast

Based on the early price action, the direction of the crude oil market the rest of the session is likely to be determined by trader reaction to the major Fibonacci level at $70.60.

A sustained move over $70.60 will indicate the presence of buyers. If this move generates enough upside momentum then look for buyers to go after $71.80. Taking out this level will extend the rally. The daily chart indicates there is plenty of room to the upside with the next major targets coming in at $79.04 and $81.05.

A sustained move under $70.60 will signal the presence of sellers. This could trigger a break into $69.29 to $68.69. Watch for buyers to show up on a test of this zone. If $68.69 fails then look for selling pressure to increase.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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