Based on Monday’s close at $56.86, the direction of the December WTI crude oil futures contract on Tuesday is likely to be determined by trader reaction to the main 50% level at $56.81.
U.S. West Texas Intermediate crude oil futures finished lower on Monday as the uncertainty over U.S.-China trade relations continued to cap gains. Worries over whether OPEC and its allies will deepen production cuts at their December 5-6 meeting have also proved to be an upside momentum-killer as well as fears over rising U.S. supply.
On Monday, December WTI crude oil settled at $56.86, down $0.38 or -0.66%.
“Oil prices are struggling at the start of the week as trade concerns derail some of the momentum we saw in October that a phase one deal would deliver a boost for energy demand,” said Edward Moya, senior market strategist at OANDA.
The main trend is up according to the daily swing chart. A trade through $57.88 will signal a resumption of the uptrend with $59.11 the next main top target. The main trend will change to down on a move through the last swing bottom at $53.71.
The main range is $62.74 to $50.89. The market is currently testing its retracement zone at $56.81 to $58.21. This zone stopped the rally last week at $57.88.
The intermediate range is $59.11 to $50.89. Its retracement zone at $55.97 to $55.00 is support. The market has been hovering over its upper or Fibonacci level at $55.97 for six trading sessions.
The new short-term range is $50.89 to $57.88. If the downside pressure escalates then look for the selling to extend into its retracement zone at $54.39 to $53.56.
Based on Monday’s close at $56.86, the direction of the December WTI crude oil futures contract on Tuesday is likely to be determined by trader reaction to the main 50% level at $56.81.
A sustained move over $56.81 will signal the presence of buyers. If this move can generate enough upside momentum then look for the rally to possibly extend into the minor top at $57.88, followed closely by the main Fibonacci level at $58.21.
Taking out $58.21 could trigger a breakout into the September 23 main top at $59.11.
A sustained move under $56.81 will indicate the presence of sellers. The first two downside targets are the intermediate Fibonacci level at $55.97, followed by a low at $55.76.
If $55.76 fails to hold then look for a break into the intermediate 50% level at $55.00.
James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.