Crude Oil Price Update – Set Up for Bearish Closing Price Reversal Top; Could Erase Weekly Gains

U.S. West Texas Intermediate crude oil futures are trading lower late in the session on Thursday after giving back all of its earlier gains. Like nearly every weather driven rally, this one looks like it’s going to end with a thud.

Small speculators buying the headlines are usually the one’s left holding the bag and this move appears to be no different. When it comes to weather rallies, the guy who pays for the earliest, most accurate report usually makes the money.

Traders who jump on the momentum tend to believe the move will last forever. During a summer drought rally, they’re the ones who think you can kill a corn or soybean plant more than once. I hope you’re not one of those traders who thinks Texas is going to experience arctic temperatures forever. But then again, the sellers or profit-takers need buyers to sell to.

At 18:58 GMT, April WTI crude oil is trading $59.96, down $1.20 or -1.96%.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, but momentum may be getting ready to shift to the downside. A trade through $62.29 will signal a resumption of the uptrend, while a move through $57.31 will change the main trend to down.

More importantly, the current chart pattern indicates a closing price reversal top is forming. If confirmed then look for the start of a 2 to 3 day correction.

The minor range is $57.31 to $62.29. Its 50% level at $59.80 is the first downside target.

The main range is $51.53 to $62.29. If the main trend changes to down then look for the selling to possibly extend into its retracement zone at $56.42 to $52.30.

Daily Swing Chart Technical Forecast

These types of rallies usually end ugly and this one is no exception. The direction of the market into the close will be determined by trader reaction to yesterday’s close at $61.16.

Bearish Scenario

A sustained move under $61.16 will indicate the presence of sellers. The first target is the pivot at $59.80.

Since the trend is up, we could see a technical bounce on the first test of $59.80. However, taking it out could drive the market into $58.77 and perhaps the main bottom at $57.31.

Bullish Scenario

A sustained move over $61.16 will signal the presence of buyers. This could trigger a retest of the intraday high at $62.29.

Side Notes

A close under $61.16 will form a daily closing price reversal top. If confirmed, this could trigger the start of a 2 to 3 day correction.