Crude Oil Price Update – Market Set-up for Correction into $54.40 to $53.56

December West Texas Intermediate crude oil futures posted a wicked outside move on Wednesday. The initial rally took out the previous top confirming the uptrend, but the subsequent sell-off has put the market in a position to form a potentially bearish closing price reversal top.

The whip-saw price action was fueled by a mixed government report. The report showed gasoline and distillate inventories fell more than expected, offsetting a surprise rise in U.S. crude stocks as imports increased.

Daily Swing Chart Analysis

The main trend is up according to the daily swing chart. It was reaffirmed early Wednesday when buyers took out yesterday closing price reversal top at $57.69.

Today’s buying stalled at $57.92. This was enough to bring in the sellers, putting the market in a position to form another closing price reversal top.

Back-to-back closing price reversal tops tends to indicate that the selling is greater than the buying at current price levels.

The resistance is the January 3 top at $58.45.

A break back under the January 17 top at $57.07 is the first sign of weakness. A move under the February 10 top at $56.16 will indicate the selling is getting stronger.

Daily Retracement Zone Analysis

The price action suggests that sellers are taking control. The closing price reversal top formation does not mean the trend is changing, but it does signal a shift in momentum to the downside. This could lead to a 2 to 3 day correction.

The main range is $50.87 to $57.92. Its retracement zone at $54.40 to $53.56 is the primary downside target.