Crude Oil Price Update – Momentum Turns Down after Closing Price Reversal Top Confirmation

U.S. West Texas Intermediate crude oil futures plunged on Wednesday after weekly government data showed a sharp rise in U.S. crude stockpiles as both exports and refinery activity fell.

At 1705 GMT, July WTI crude oil futures are trading $71.60, down $0.60 or -0.83%.

According to the U.S. Energy Information Administration, U.S. commercial crude inventories surged by 5.8 million barrels in the week-ending May 18. Traders were looking for a drawdown of 2.5 million barrels.

U.S. crude oil exports dropped by more than 800,000 barrels a day last week to about 1.75 million barrels a day. Additionally, crude imports were up to 558,000 barrels.

Daily Technical Analysis

The main trend is up according to the daily swing chart. However, momentum shifted to the downside with the formation of a closing price reversal top on Tuesday and the subsequent confirmation earlier today.

A trade through $72.90 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down when sellers take out the swing bottom at $70.24.

The short-term range is $70.24 to $72.90. Its 50% level or pivot is at $71.57. This level is controlling the short-term direction of the market.

The main range is $66.77 to $72.90. If the downside pressure continues and the trend changes to down then look for the selling to continue into its retracement zone at $69.84 to $69.11.

Daily Technical Forecast

Based on the current price action, the direction of the crude oil market the rest of the session is likely to be determined by trader reaction to the 50% level at $71.57.

A sustained move over $71.57 will indicate the presence of buyers. This could trigger a move into an uptrending Gann angle at $71.99. Overtaking this Gann angle will indicate the buying is getting stronger.

A sustained move under $71.57 will signal the presence of sellers. This could trigger a further break into the next uptrending Gann angle at $70.77. Since the main trend is up, buyers could come in on the first test of this angle.

If $70.77 fails as support then look for a further break into the main bottom at $70.24. This is followed by another uptrending Gann angle at $69.98 and a 50% level at $69.84.

Watch the price action and read the order flow at $71.57 the rest of the session, trader reaction to this level will tell us if the buyers or sellers are in control.