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James Hyerczyk
Crude Oil
Crude Oil

U.S. West Texas crude oil futures continued to plunge on Monday, dragged down by steep losses in the U.S. equity markets. The catalysts behind the selling pressure was the U.S. government shutdown and a worsening global economy. Thin liquidity is also helping to accelerate the drop in prices as well as the lack of confidence in the OPEC-led attempt to stabilize prices by reducing production starting January 1.

At 1500 GMT, February WTI crude oil is trading $44.63, down $0.91 or 2.02%.

Daily February WTI Crude Oil

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. This downtrend was reaffirmed earlier today when sellers took out the February 26, 2016 main bottom at $44.68.

Given the prolonged move down in terms of price and time, the only chart pattern that can turn this market around is a dramatic closing price reversal bottom.

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Daily Swing Chart Technical Forecast

Based on the early price action, the direction of the February WTI crude oil market the rest of the session is likely to be determined by trader reaction to Friday’s close at $45.59.

Bullish Scenario

Overcoming and sustaining a rally over $45.59 will indicate the presence of buyers. This could generate an intraday short-covering rally. A close over this level will form the closing price reversal bottom. If confirmed, this could trigger the start of a 2 to 3 day counter-trend rally.

Bearish Scenario

A sustained move under $45.59 will signal the presence of sellers. This could trigger a break into $44.68. If we don’t get a technical bounce on the first test of this level then look for the selling pressure to intensify.

If $44.68 is taken out with conviction then look for a potential acceleration to the downside with the next major target the February 9, 2016 main bottom at $43.51, followed closely by the January 20, 2016 main bottom at $41.48.

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