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James Hyerczyk
Crude Oil
Crude Oil

U.S. West Texas Intermediate crude oil futures spiked lower on Monday, reaching levels not touched in 18 months. From peak to trough, U.S. crude oil has fallen nearly 45 percent from its 52-week high at the start of October. Although an OPEC-led group plans to start reducing output by 1.2 million barrels per day on January 1, oil traders don’t seem to be showing much interest in this move. Instead, they are focusing on concerns over a global economic slowdown and the steep drop in U.S. equity markets.

On Monday, February WTI crude oil futures settled at $42.53.

Daily February WTI Crude Oil

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through $42.36 will reaffirm the downtrend. The nearest main top is $54.77 so I don’t expect a change in trend. However, due to the prolonged move down in terms of price and time, crude oil begins the session inside the window of time for a closing price reversal bottom.


Daily Swing Chart Technical Forecast

The direction of the February WTI crude oil futures market on Wednesday is likely to be determined by trader reaction to Monday’s low at $42.36.

Bullish Scenario

A sustained move over $42.36 will indicate the presence of buyers. This could trigger an intraday short-covering with the first objective Monday’s high at $46.24. Taking out this level won’t change the trend to up, but it will make $42.36 a new minor bottom.

Bearish Scenario

A sustained move under $42.36 will signal the presence of sellers. This should trigger a quick break into the January 20, 2016 main bottom at $41.48. This is the major bottom that launched the nearly 3 year rally.

If $41.48 fails then look for the selling to extend into the bottom from the week-ending February 12, 2016 at $38.73. This is low is from the nearby futures chart.

Closing Price Reversal Bottom Chart Pattern

Taking out $42.36 then turning higher for the session could trigger an intraday short-covering rally. Finishing the session higher will form the closing price reversal bottom. If confirmed, this could trigger the start of a 2 to 3 day counter-trend rally.

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