Crude Oil Price Update – Needs to Hold Above $60.37 to Sustain the Rally

February West Texas Intermediate crude oil futures are trading higher shortly before the regular session opening. Today’s rally caught some traders off guard because yesterday’s price action suggested the market was setting up for a near-term correction. This thought was triggered by the fact that the previously shutdown pipelines in the North Sea and Libya are back on line. Additionally, some traders also felt the unrest in Iran would have no effect on supply.

The price action does indicate that the market is in the strong hands of speculative buyers who are choosing to ignore warnings of increasing U.S. production.

Daily Technical Analysis

The main trend is up according to the daily swing chart. However, the market is up 12 days from its last main bottom so today’s session begins with crude oil in the window of time for a potentially bearish closing price reversal top.

The daily chart shows there is plenty of room to the upside with the July 14, 2015 top at $62.02 the next major target.

On the downside are a series of main bottoms at $58.99, $58.90 and $58.60. Since old tops tend to become new bottoms, these levels should be considered support.

Daily Technical Forecast

Based on the early price action, the direction of the crude oil market today will be determined by trader reaction to Tuesday’s close at $60.37. Holding above this level will signal the presence of buyers. A sustained move below this level will indicate the return of sellers.