Based on Friday’s price action and the close at $60.30, the direction of the September WTI crude oil futures contract on Monday is likely to be determined by trader reaction to the main Fibonacci level at $60.18.
U.S. West Texas Intermediate crude oil futures finished the week nearly 5% higher with most of those gains attributed to the shutdown off nearly half the rigs in the Gulf of Mexico due to a tropical storm, however, the price action was muted on Friday as traders mulled the impact of lower future demand.
On Friday, September WTI crude oil futures settled at $60.30, up $0.02 or +0.03%.
The main trend is up according to the daily swing chart, however, momentum shifted to the downside with the formation of the closing price reversal top at $61.02 on July 11 and the subsequent confirmation on Friday.
A trade through $61.02 will negate the closing price reversal top and signal a resumption of the uptrend. This could trigger a break out to the upside with the next target top coming in at $64.02.
The main trend is safe for now with a change in trend taking place on a move through $56.13.
The main range is $65.92 to $50.91. Its retracement zone at $60.18 to $58.41 is controlling the near-term direction of the market.
The short-term range is $50.91 to $61.02. Its retracement zone at $59.01 to $57.47 is also a potential downside target.
Combining the two retracement zones makes $59.01 to $58.41 the best support area.
Based on Friday’s price action and the close at $60.30, the direction of the September WTI crude oil futures contract on Monday is likely to be determined by trader reaction to the main Fibonacci level at $60.18.
A sustained move over $60.18 will indicate the presence of buyers. If this creates enough upside momentum then look for a breakout over $61.02. This is a potential trigger point for an acceleration to the upside with the next major target the $64.02 main top from May 20.
A sustained move under $60.18 will signal the presence of sellers. The first downside target is the short-term Fibonacci level at $59.01. Since the main trend is up, buyers could come in on a test of this level.
If $59.01 fails as support then look for the 50% level at $58.41 to provide support. If this fails then the selling is likely to extend into the next 50% level at $57.47.
The 200-day Moving Average comes in at $59.12. Watch the price action and read the order flow on a test of this level. Hedge fund buyers could come in to defend the uptrend.
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.