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James Hyerczyk
WTI Crude Oil

The bottom fell out of the U.S. West Texas Intermediate crude oil market on Thursday on heavy hedge fund selling following a violation of the 200-Day Moving Average. Before making this move and triggering a wave of sell-stops, the market was already trading with a strong downside bias due to escalating tensions over U.S.-China trade relations and worries over slowing global economic growth.

At 18:12 GMT, July WTI crude oil is trading $57.88, down $3.54 or -5.78%.

The price action also suggests that speculative buyers, betting on an escalation of geopolitical tensions in the Middle East, may have trimmed their positions on reports that the White House may be trying to arrange negotiations between the United States and Iran.

Daily July WTI Crude Oil

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The downtrend was reaffirmed on Thursday when short sellers drove the market through the previous main bottom at $60.10. This also triggered a wave of sell stops.

Further confirmation of the downtrend took place when sellers took out the March 28 main bottom at $58.60. The new lower main top is $63.96. A trade through this level will change the main trend to up.

The main range is $75.20 to $44.20. Its retracement zone at $59.70 to $63.36 is controlling the longer-term term direction of the market. On Thursday, July WTI crude oil took out the lower or 50% level of the market at $59.70. This triggered additional sell stops, helping to accelerate the market to the downside.

The short-term range is $44.20 to $66.44. If the down side momentum continues then look for the selling to possibly extend into its retracement zone at $55.32 to $52.70.

Finally, after holding above the 200-Day Moving Average since April 1, sellers took out this level at $60.66 with conviction, once again fueling a wave of sell stops and perhaps flipping the hedge funds to the short side.

Daily July WTI Crude Oil (Close Up)

Daily Swing Chart Technical Forecast

Look for the downside pressure to continue into the extended close on Thursday as long as the market remains under the major 50% level at $59.70. The first sign of strength late in the day will be a move back over the previous main bottom at $58.60.

If the selling pressure continues then look for another acceleration to the downside with targets coming in at $55.80 and $55.32.

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