Crude Oil Price Update – In Position to Challenge Major Fibonacci Level at $63.45

U.S. West Texas Intermediate crude oil futures finished sharply higher on Friday and within striking distance of a major technical level. Taking out this level could fuel the next leg up of the nearly four month rally.

While the OPEC-led supply cuts and sanctions against Venezuela and Iran continued to underpin prices, the market received a boost on Friday after a government report showed the economy added more jobs than expected in March. This news helped temper fears about a decline in global crude demand. Further support was providing by concerns that an escalating conflict in Libya could tighten oil supplies.

On Friday, May WTI crude oil settled at $63.08, up $0.98 or +1.58%.

 

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was reaffirmed on Friday when buyers took out the previous main top at $62.99. The price action created a new main top at $61.82. A trade through this level will change the main trend to down.

The main range is $75.80 to $43.46. The market is currently trading inside its retracement zone at $59.63 to $63.45. This zone is controlling the longer-term direction of the market.

May WTI crude oil is also trading on the strong side of the 200-Day Moving Average at $60.76. This is also a bullish sign since usually this move attracts the attention of the Commodity and Hedge Funds.

Daily Swing Chart Technical Forecast

Based on Friday’s price action and the close at $63.08, the direction of the May WTI crude oil futures contract is likely to be determined by trader reaction to the Fibonacci level at $63.45.

Bullish Scenario

A sustained move over $63.45 will indicate the presence of buyers. This could trigger an acceleration to the upside since there is no major resistance until the minor top at $71.93.

Bullish traders only have to worry about a closing price reversal top or a break through the main bottom at $61.82.

Bearish Scenario

A sustained move under $63.45 will signal the presence of sellers. If this generates enough downside momentum then look for sellers to go after the main bottom at $61.82. The trend will change to down on a move through this bottom. This could trigger a further break into the 200-Day Moving Average at $60.76 and the 50% level at $59.63.

Closing Price Reversal Top Set-Up

Due to the prolonged move up in terms of price and time, and the testing of the major Fib level at $63.45, traders should watch for a potentially rally-killing closing price reversal top.

Taking out $63.34 then turning lower for the session will signal that the selling is greater than the buying at current price levels. Closing below $63.08 will form a closing price reversal top. If confirmed, this could trigger the start of a 2 to 3 day correction.