Crude Oil Price Update – Setting Up for Short-covering Rally

August West Texas Intermediate crude oil futures are trading slightly higher shortly before the regular session opening. The market is trading inside yesterday’s range. This indicates investor indecision and impending volatility. We could also be going through a transition period due to oversold conditions.

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. The main trend will turn up on a trade through $45.28.

The next major downside target is the April 5, 2016 main bottom at $41.98.

The short-term range is $45.28 to $42.05. Its 50% level or pivot is $43.67. This is the first upside target today. Trader reaction to this pivot will tell us if the buying is getting stronger, or if sellers are trying to regain control.

Forecast

Based on the current price at $42.76 and the earlier price action, the direction of crude oil the rest of the session is going to be determined by trader reaction to the downtrending angle at $42.72.

Taking out $42.72 could trigger an acceleration to the upside with the next targets the short-term pivot at $43.67 and the short-term downtrending angle at $43.78.

The inability to overcome $42.72 will signal the presence of sellers. This could lead to a rest of the downtrending angle at $42.28. Crossing to the weak side of this angle will likely drive the market into $42.05 then $41.98.

Watch the price action and read the order flow at $42.72 all session. Trader reaction to this angle will determine whether the market moves up to the pivot at $43.67, or resumes the downtrend.