Crude Oil Price Update – Still in the Hands of Strong Buyers, but Bumping into Long-Term Resistance

A weaker U.S. Dollar is helping to support March West Texas Intermediate crude oil price on Friday. The futures contract is on track for a weekly gain of 4.2 percent.

Besides the weaker U.S. Dollar which tends to drive up foreign demand for dollar-denominated crude oil, the market is also being underpinned by optimism over the OPEC-led plan to cut production and a consistent drop in U.S. inventories.

Helping to put a lid on the market may be expectations of weakening seasonal demand. Additionally, on the supply side, U.S. oil production is expected to hit 10 million barrels per day soon, putting it on par with top exporter Saudi Arabia.

Daily Swing Chart Analysis

The main trend is up according to the daily swing chart. However, momentum may be getting ready to turn down with the formation of a closing price reversal top. If confirmed, this chart pattern could lead to a 2 to 3 day break, or a 50% correction of the last rally.

A trade through $66.66 will negate the closing price reversal top chart pattern and signal a resumption of the uptrend. This could lead to a test of the May 12, 2015 main top at $66.89. This level is a potential trigger point for an acceleration into the February 3, 2015 main top at $68.37.

The trade through $65.08 confirmed the chart pattern earlier today, but there was not much follow-through to the downside.

The short-term range is $62.78 to $66.66. Its 50% level at $64.72 is the primary downside target. Today’s sell-off drove the market to $64.91. Since the main trend is up according to the daily swing chart, buyers are likely to come in on a test of this level. If they fail to show up, then the selling will extend into the major 50% level at $64.11.

Daily Swing Chart Forecast

Based on the earlier price action, the direction of crude oil today will be determined by trader reaction to the short-term 50% level at $64.72.

A sustained move over $64.72 will indicate the presence of buyers. This could create the upside momentum needed to challenge the June 10, 2015 top at $66.16, yesterday’s high at $66.66 and the May 12, 2015 top at $66.89.

A sustained move under $64.72 will signal the presence of sellers. This could trigger a quick break into the major 50% level at $64.11.

The 50% level at $64.11 is the most important price on the chart since it represents 50% of the contract’s range.