Crude Oil Price Update – Set Up for Potentially Bearish Closing Price Reversal Top

U.S. West Texas Intermediate crude oil futures are trading lower after hitting its highest level since December 7. Profit-taking is likely behind the weakness. However, there are still lingering concerns over rising U.S. production, and key issues with China that have to be resolved despite favorable trade talks earlier in the week. Underpinning the market are the OPEC-led production cuts.

AT 1343 GMT, March WTI crude oil futures are trading $52.62, down $0.29 or -0.55%.

I’m convinced that this first leg up from the multi-year low in December was short-covering. There’s nothing wrong with that. However, I don’t think the rally can be sustained by only short-covering. I also don’t think buyers are going to chase this market at current levels when it was over $10 cheaper three weeks ago. Therefore, I’m looking for a pullback into a value area over the near-term. This should attract the new buyers this market will need to take it higher.

Daily Technical Analysis

The main trend is down according to the daily swing chart. However, momentum is trending higher. A trade through $54.98 will change the main trend to up.

The market is currently up 12 sessions from the last main bottom on December 24. This puts it inside the window of time for a potentially bearish closing price reversal top. We’ve already had the higher-high. Now all we need a lower close to form the chart pattern. If confirmed, this could lead to the start of a 2 to 3 day correction.

The main range is $54.98 to $42.67. Its retracement zone at $50.28 to $48.83 is the first downside target.

Daily Technical Forecast

Based on the early price action, the direction of the March WTI crude oil futures contract the rest of the session is likely to be determined by trader reaction to yesterday’s close at $52.91.

Bullish Scenario

Recapturing $52.91 and sustaining the move will indicate the return of buyers. This could create the upside momentum needed to retest the downtrending Gann angle at $53.36, followed by the intraday high at $53.61.

Overtaking $53.61 could drive the market into the next downtrending Gann angle at $54.17. This is the last potential resistance angle before the $54.98 main top.

Bearish Scenario

A sustained move under $52.91 will signal the presence of sellers. If the selling pressure increases then look for the break to extend into the next downtrending Gann angle at $51.73. This is a potential trigger point for an acceleration to the downside with the next target the Fibonacci level at $50.28.