Crude Oil Price Update – Trader Reaction to Long-Term Fibonacci Level at $46.43 Sets the Tone

U.S. West Texas Intermediate crude oil futures rose to their highest level since March on Friday on renewed hopes for a U.S. stimulus deal and after major oil producers agreed to increase output by a modest 500,000 barrels per day (bpd) from January.

At 06:37 GMT, January WTI crude oil futures are trading $46.34, up $0.70 or 1.53%.

OPEC+ had been expected to extend existing cuts until at least March, after backing down from earlier plans to boost output by 2 million bpd so the news is somewhat disappointing. Nonetheless, the market rallied which suggests traders are reacting more positively toward demand expectations from the vaccine and stimulus, and not from OPEC’s, management of supply.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The main trend was reaffirmed on Friday when buyers took out the previous main top at $46.26. A trade through $43.92 will change the main trend to down.

The market is currently trading inside a major retracement zone at $42.57 to $46.43. This zone is controlling the longer-term direction of the market.

Daily Swing Chart Technical Forecast

The early price action suggests the direction of the January WTI crude oil market on Friday is likely to be determined by trader reaction to the long-term Fibonacci level at $46.43.

Bullish Scenario

A sustained move over $46.43 will indicate the presence of buyers. This could trigger an acceleration to the upside since the next major target is the March 3 main top at $48.88.

Bearish Scenario

A sustained move under $46.43 will signal the presence of sellers. Taking out $45.64 will turn the market lower for the session, putting it in a position to post a potentially bullish closing price reversal top. This won’t change the trend, but it could trigger a 2 to 3 day counter-trend sell-off.

Continued pressure under $45.64 could lead to a test of the main bottom at $43.92. The trend will change to down on a trade through $43.92. This could trigger a further break into the long-term 50% level at $42.57.