Crude Oil Price Update – Strengthens Over $71.80, Weakens Under $70.50

July West Texas Intermediate crude oil futures are trading slightly better shortly before the regular session opening. Volume was relatively low during the pre-market session. The market is trading inside yesterday’s range which suggests investor indecision and impending volatility.

The current rally is being driven by speculators betting the U.S. sanctions on Iranian exports will tighten global supplies even further. However, there are some who believe Kuwait or Iraq will step in to make up for the short-fall. Furthermore, gains may be capped by rising U.S. production which means today’s rig count report could drive volatility into the market.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through $71.80 will signal a resumption of the uptrend.

Due to the prolonged move up in terms of price and time, the only chart pattern long investors have to fear is the potentially bearish closing price reversal top. This chart pattern may not change the trend to down, but it could trigger a 2 to 3 day correction.

The contract range is $89.51 to $40.02. Its retracement zone is $70.60 to $64.77. Trading above this zone is helping to generate a strong upside bias. This zone is also new support.

Daily Swing Chart Technical Forecast

Based on the early price action, the direction of the crude oil market today will be determined by trader reaction to the major Fibonacci level at $70.60.

A sustained move over $70.60 will indicate the presence of buyers. If this generates enough upside momentum, buyers may make a run at yesterday’s high at $71.80. This is a possible trigger point for an acceleration to the upside.

The daily chart indicates there is plenty of room to the upside before the market runs into major resistance at $79.04 and $81.05. However, I don’t expect the market to get there today.

Taking out $70.60 and sustaining the move will signal the presence of sellers. This could trigger an acceleration into the short-term retracement zone at $69.29 to $68.69.