Crude Oil Price Update – Next Move Will Be Headline Driven – Strengthens Over $58.95, Weakens Under $54.79

U.S. West Texas Intermediate and international-benchmark Brent crude oil finished mixed on Friday, but lower for the sixth consecutive week. After a steep plunge on Tuesday, both futures contracts stabilized for three days even closing higher two of those days. Both U.S. and Brent also settled inside major long-term retracement zones, suggesting momentum may be ready to shift to the upside after the prolonged move down in terms of price and time.

For the week, January WTI crude oil settled at $56.68, down $3.68 or -6.10% and January Brent crude oil settled at $66.76, down $3.42 or -5.12%.

Fundamentally, rising production and concerns over future demand continued to weigh on prices. However, some support did emerge in the form of expectations that OPEC and its allies would agree to cut output next month.

Weekly Swing Chart Technical Analysis

The main trend is down according to the weekly swing chart. The market isn’t close to changing the trend to up, but we need to continue to watch for a closing price reversal bottom. This will be the best sign that the buying is greater than the selling at current price levels.

A trade through $54.78 will signal a resumption of the downtrend. The selling will expand if $54.06 fails with high volume. The weekly chart shows there is plenty of room to the downside with targets at $47.96 and $46.00.

Weekly Retracement Level Technical Analysis

The major retracement zone is $58.95 to $54.79. The market is currently sitting inside this zone. It is controlling the longer-term direction.

The main range is $46.00 to $76.55. Its retracement zone at $57.67 to $61.28 is resistance.

The future contract’s retracement zone at $65.31 to $70.96 is major resistance.

Weekly Swing Chart Technical Forecast

Based on last week’s price action, the direction of the January WTI crude oil futures contract will be determined by trader reaction to the major Fibonacci level at $54.79.

Bullish Scenario

Holding above $54.79 will indicate the presence of buyers. Any rally is likely to be fueled by short-covering or aggressive counter-trend buying. It is also likely to be fueled by bullish headlines about production cuts.

The key to triggering the rally will be overcoming retracement levels with enough strength to force the shorts to cover. The first level to overcome is the Fib level at $57.67. The most important level to overtake is $58.95. The market could start to accelerate to the upside if this level is taken out with conviction.

Bearish Scenario

Look out to the downside if $54.79 is taken out with conviction. If the selling pressure continues to increase then look for $54.78 and $54.06 to fail.

The weekly chart starts to open up to the downside under $54.06. This could even trigger another steep plunge. The next two major target levels are $47.96 and $46.00.

Basically, look for a bullish tone to develop on a sustained move over $58.95 and for the bearish tone to resume on a sustained move under $54.79.