Crude Oil Price Update – Profit-taking, Short-covering, Counter-trend Buying Underpinning Market

August West Texas Intermediate crude oil is trading slightly higher shortly before the regular session opening. The market is coming down from an earlier test of key 50% level. This is a normal retracement in a weak market.

Technical Analysis

The main trend is down according to the daily swing chart. A trade through $42.05 will signal a resumption of the downtrend, followed by the April 5, 2016 main bottom at $41.98.

A trade through $45.28 will change the main trend to up. This is followed by a minor top at $46.94.

The short-term range is $45.28 to $42.05. Its 50% level or pivot comes in at $43.67. This pivot stopped a rally earlier in the session.

Forecast

Based on the current price at $43.13 and the earlier price action, a sustained move under the pivot at $43.67 will signal the presence of sellers. This could drive the market into the nearest downtrending angle at $42.78.

Crossing to the weak side of the angle at $42.78 will signal that the selling is getting stronger. This could lead to an acceleration into $41.98.

Overcoming the pivot at $43.67 will indicate the presence of buyers. This could generate a rally into a cluster of levels at $44.03, followed closely by $44.45 and another downtrending angle at $44.66.

The fundamentals haven’t changed so any rallies are likely to be driven by profit-taking, short-covering and extremely light counter-trend buyers.

Continue to watch the price action and read the order flow at the pivot at $43.67. Trader reaction to this price should tell us if the buying is getting stronger or if sellers are retaking control.