Crude Oil Price Update – Sell Weakness or Rally Back to 200-Day Moving Average?

U.S. West Texas Intermediate crude oil futures bounced back on Friday after posting a steep loss the previous session. The price action suggests that Thursday’s sell-off was overcooked to the downside. It could also be an indication that the selling was fueled by massive sell stops placed under the 200-day Moving Average and a long-term 50% level.

On Friday, July WTI crude oil is trading $58.30, down $0.35 or -0.58%.

According to a press release from the CME Group, regular trading for oil on the New York Mercantile Exchange and metals on the Comex will be closed for the Memorial Day holiday. The exchanges “will not derive or disseminate settlement prices for CME, CBOT, NYMEX or COMEX” on Monday.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The trend turned down on May 23 when sellers took out the previous main bottom at $60.10. It was reaffirmed when the next main bottom at $58.60 failed as support. The next major target is the March 8 bottom at $55.80. The main trend will change to up on a move through $63.96.

The long-term retracement zone at $59.70 to $63.36 is new resistance. This zone is controlling the longer-term direction of the July WTI crude oil market.

On the downside, the next major retracement zone support comes in at $55.32 to $52.70.

Daily Swing Chart Technical Forecast

If the market is short-term oversold, or if the steep break was fueled by sell stops then look for a rally back to the 50% level at $59.70, or the 200-day moving average at $60.61. If this market is headed lower then I think bearish traders would prefer to sell a rally into these levels rather than weakness.

If shorts are in control and longs are willing to take any price just to get out of their positions then look for the selling to continue through last week’s low at $57.33. This could create enough downside momentum to challenge the next main bottom at $55.80 and the 50% level at $55.32.

Watch the price action and read the order flow.