Crude Oil Price Update – Strengthens Over $49.02, Weakens Under $48.57

U.S. West Texas Intermediate crude oil futures are trading slightly higher early Tuesday. The market is also trading inside yesterday’s wide range which suggests investor indecision and impending volatility.

The market could also be transiting to the downside after hitting its highest level since December 18 on Monday. Crude oil is also up nine sessions from its last main bottom. After rallying 7 to 10 days, profit-takers have been known to show up. Furthermore, the market is trading inside a key retracement zone. With the main trend down, profit-takers tend to sell a test of this zone.

At 0710 GMT, February WTI crude oil futures are trading $48.58, up $0.06 or +0.12%.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, however, momentum is trending higher. The main trend is safe. It will change to up on a trade through $54.77. A move through $42.36 will signal a resumption of the downtrend.

A short-term top at this time won’t necessarily be a bad thing. In fact, it will be necessary to bring the swing top down for the next breakout to the upside and to set up the next higher bottom, which will be a sign of new buyers.

If all goes as planned, $49.79 will become the new main top, leading to a correction into the short-term 50% to 61.8% retracement zone at $46.08 to $45.20.

The main range is $54.77 to $42.36. Its retracement zone at $48.57 to $50.03 is currently being tested. It has been providing resistance the past three sessions. Inside this zone is a downtrending Gann angle at $49.02.

Daily Swing Chart Technical Forecast

Based on the early price action and the current price at $48.58, the direction of the February WTI crude oil futures contract on Tuesday is likely to be determined by trader reaction to the downtrending Gann angle at $49.02.

Bullish Scenario

Taking out and sustaining a rally over $49.02 will indicate the presence of buyers. If this generates enough upside momentum then look for a retest of yesterday’s high at $49.79. This is followed by the main Fibonacci level at $50.03. This price is a potential trigger point for an acceleration to the upside with the next target angle dropping in at $51.09.

Bearish Scenario

A sustained move under $51.09 will signal the presence of sellers. The first downside target is the main 50% level at $48.57.

The daily chart is wide open under $48.57. If this move creates enough downside momentum then look for a potential break into the steep uptrending Gann angle at $46.86. This angle is very important because it has been guiding the market higher since the $42.36 bottom on December 24, or 9 days.

If the Gann angle fails then look for an eventual break into the short-term retracement zone at $46.08 to $45.20. This should be a good buying opportunity.