Crude Oil Price Update – Needs to Test $70.69 to $71.23 to Set-up Secondary Lower Top

September West Texas Intermediate Crude oil futures are trading higher shortly after the cash market opening on Thursday. The market is recovering after yesterday’s steep sell-off was deemed to be overdone by some short-term technical traders.

On Thursday, a nearly perfect storm of bearish news fueled a plunge through several layers of technical support, taking out sell stops along the way. Today’s strength is being fueled by a report from the International Energy Agency (IEA), which said the world’s oil supply cushion “might be stretched to the limit” due to production losses.

If sell stops fueled the move then this means long traders exited. It also means the market needs to rally back into resistance in order to attract new short-sellers. This is what we’ll probably be looking at over the near-term. If this market is indeed turning lower, then it needs to set up a secondary lower top.

Daily Technical Analysis

The main trend is down according to the daily swing chart. The trend turned down on Wednesday when sellers took out the last swing bottom at $69.93. A trade through $68.40 will signal a resumption of the downtrend. A rally through $72.98 will change the trend to up.

The main range is $62.99 to $72.98. Its retracement zone at $67.99 to $66.81 is the primary downside target. Passing through this zone is an uptrending Gann angle at $67.24, making it a valid downside target also. Buyers could show up the initial test of this area.

The short-term range is $72.98 to $68.40. If today’s rally continues then we could see a test of its retracement zone at $70.69 to $71.23. Since the trend is down, sellers could show up on a test of this zone. If they can stop the rally then a secondary lower top is likely to form.

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Daily Technical Forecast

Momentum and volatility will continue to be in play today.

Upside momentum is likely to drive the September WTI crude oil market into the retracement zone at $70.69 to $71.23. Inside this zone is a steep downtrending Gann angle at $70.98. Since the trend is down, sellers are likely to show up on a test of this area.

If sellers retake control then look for a retest of yesterday’s low at $68.40, followed by a 50% level at $67.99, an uptrending Gann angle at $67.24 and a Fibonacci level at $66.81. Aggressive counter-trend buyers could come in on a test of these levels. They will be trying to form a secondary higher bottom.

Over the near-term, the next major move is likely to be determined by trader reaction to $70.69 to $71.23.