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James Hyerczyk
Crude Oil
Crude Oil

U.S. West Texas Intermediate crude oil futures settled sharply higher last week, continuing the breakout to the upside on long-term charts, which began the week before. Fundamentally, investors are concerned about a potential supply shortage.

With sanctions against Iran set to begin on November 4, the global supply is about to take a hit and traders aren’t sure that extra production promised by Saudi Arabia and Russia will be enough to fill in the supply gap.

For the week, November WTI crude oil closed at $73.25, up $2.47 or +3.49%.

Weekly November WTI Crude Oil

Weekly Technical Analysis

The main trend is up according to the weekly swing chart. The next major top is $81.34. Due to the prolonged move in terms of price and time, the market remains vulnerable to a closing price reversal top. However, this won’t be enough to change the main trend to down. If it does occur, it will be designed to alleviate some of the upside pressure. The trend will change to down on a move through $62.48, or over $10.00 away.

The first major support is the long-term Fibonacci level at $70.86. The second major support is the long-term 50% level at $65.15. Holding above $70.86 will help sustained the strong upside bias.

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Weekly Technical Forecast

Based on the recent price action, the direction of the November WTI crude oil futures contract for the week is likely to be determined by trader reaction to the Fibonacci level at $70.86.

Bullish Scenario

A sustained move over $70.86 will indicate the presence of buyers. Taking out last week’s high at $73.73 and sustaining the rally will indicate the buying is getting stronger. If this generates enough upside momentum then look for the rally to possibly extend into a long-term downtrending Gann angle at $75.60.

We could see sellers show up on the first test of $75.60. This will likely be profit-takers. However, overtaking the angle could trigger an acceleration to the upside since the weekly chart indicates there is plenty of room to the upside with $81.34 the next major upside target.

Bearish Scenario

Taking out last week’s high at $73.73 then breaking back under last week’s close at $73.25 will be the first sign of sellers. This move will indicate the selling is greater than the buying at current price levels, but won’t necessarily indicate the trend is getting ready to turn down. It will also signal a shift in momentum.

A break back under the Fibonacci level at $70.86 will indicate some serious selling is taking place. This could lead to a break into an uptrending Gann angle at $70.69. This is only a minor angle, but nonetheless, a test of it could bring in new buyers. However, if it fails then look out to the downside.

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