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James Hyerczyk
Crude Oil
Crude Oil

U.S. West Texas Intermediate Crude Oil futures are trading slightly higher early Tuesday after surging more than 2.70% the previous session. The rally was led by international-benchmark Brent Crude Oil futures which are rapidly approaching a 4-year high. The catalyst behind the strength continues to be concerns over tighter supply once the U.S. sanctions against Iran begin next month.

At 0510 GMT, November WTI Crude Oil is trading $75.52, up $0.22 or +0.29%.

Daily November WTI Crude Oil

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through $75.77 will extend the rally. The main trend changes to down on a trade through $67.79, which means the uptrend is safe for now. However, this is the 12th day up from the last main bottom, which puts the market inside the window of time for a closing price reversal top.

The formation of a closing price reversal top will not mean the trend is getting ready to change to down, but it could lead to a 2 to 3 day break, primarily designed to alleviate some of the upside pressure. Since the main trend is up, buyers are likely to come in on any weakness so don’t look for a prolonged move down in terms of price and time unless there is surprise bearish news.

The minor trend is up. A trade through $71.47 will change the minor trend to down. If $71.47 to $75.77 becomes a minor range then its 50% level or pivot at $73.62 will be the first downside target.

The major support remains the long-term Fibonacci level at $70.86.


Daily Swing Chart Technical Forecast

Based on Monday’s close at $75.30 and since the rally is being driven by momentum, the direction of the November WTI Crude Oil futures contract on Tuesday is likely to be determined by trader reaction to yesterday’s high at $75.77.

Bullish Scenario

If buyers can take out $75.77 with conviction then look for another price surge because the next objective is the November 21, 2014 main top at $80.10.

Bearish Scenario

The failure to take out $75.77 will signal the lack of buyers or the return of sellers. This is likely to only be profit-taking or position-squaring.

Taking out $75.77 then closing lower for the session will be a more serious sign of a short-term top. This closing price reversal chart pattern could trigger the start of a 2 to 3 day correction with the first target $73.62.

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