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James Hyerczyk
WTI Crude Oil

U.S. West Texas Intermediate crude oil futures slid more than 6% towards $37.00 a barrel on Tuesday, its 5th session of decline, pressured by concerns that a recovery in demand could weaken as coronavirus infections flare up around the world. Both WTI and Brent have dropped out of the ranges they were trading in throughout August. The bottom of these ranges are new resistance.

At 11:45 GMT, October WTI crude oil is trading $37.31, down $2.46 or -6.19%.

The drivers of the weakness on Tuesday are a jump in COVID-19 cases and a price cut by Saudi Arabia. The OPEC+ production cuts should eventually provide a floor for the market, but today’s price action suggests we haven’t hit that level yet. Prices will continue to fall until they hit a value zone, attractive enough to bring in new buyers.

Daily October WTI Crude Oil

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The trend turned down last week when sellers took out the main bottom at $41.46. It was reaffirmed when bottoms at $39.00 and $37.56 failed to hold. Previous bottoms could become new resistance.

Due to the prolonged move down in terms of price and time, the best chart pattern to signal short-term support has been reached will be a closing price reversal bottom.

The short-term range is $32.66 to $43.78. The market is currently testing its retracement zone at $38.22 to $36.91. Aggressive counter-trend buyers could come in on a test of this zone, but if it fails, there could be another acceleration to the downside with the main bottom at $35.25 the next target.

The main range is $23.26 to $43.78. Its 50% to 61.8% retracement zone at $33.52 to $31.10 is the best downside target and value zone.


Daily Swing Chart Technical Forecast

Based on the early price action and the current price at $37.31, the direction of the October WTI crude oil market the rest of the session on Tuesday is likely to be determined by trader reaction to the short-term Fibonacci level at $36.91.

Bearish Scenario

A sustained move under $36.91 will indicate the presence of sellers. This could trigger an acceleration to the downside with the next target the main bottom at $35.25.

A failure to hold $35.25 will indicate the selling is getting stronger. This could extend the break into main 50% level at $33.52.

Bullish Scenario

Holding $36.91 will indicate the selling is slowing down or the counter-trend buying is getting a little stronger. If this creates enough upside momentum then look for the intraday rally to possibly extend into the short-term 50% level at $38.22. The short-covering rally will pick up steam on a move over $38.22.

For a look at all of today’s economic events, check out our economic calendar.
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