The direction of the October WTI crude oil futures contract is likely to be determined by trader reaction to the short-term Fibonacci level at $36.91.
U.S. West Texas Intermediate crude oil futures are edging higher shortly after the opening on Wednesday after clawing back earlier losses. Despite the early gains, the move is likely to be met with renewed short-selling as the supply/demand fundamentals remain overwhelmingly bearish.
The rebound in prices is likely being fueled by profit-taking due to short-term oversold conditions and a slight recovery in demand for higher risk assets after a three day stock market plunge. Helping to cap gains will be concerns over a surge in COVID-19 cases in some countries that are dashing hopes for a steady recovery in global demand.
The main trend is down according to the daily swing chart. A trade through $36.13 will signal a resumption of the downtrend with the next target the $35.25 main bottom.
The main trend will change to up on a move through $43.78. This is highly unlikely, but there is room for a normal 50% correction.
The short-term range is $32.66 to $43.78. The market is currently straddling its retracement zone at $38.22 to $36.91. Since the main trend is down, this zone is potential resistance.
The new minor range is $43.78 to $36.13. Its 50% level at $39.96 is a potential upside target.
On the downside, the major target zone is $33.52 to $31.10. A test of this zone is likely to bring in some strong buyers since it represents value.
Daily Swing Chart Technical Forecast
Based on the early price action, the direction of the October WTI crude oil futures contract on Wednesday is likely to be determined by trader reaction to the short-term Fibonacci level at $36.91.
A sustained move over $36.91 will indicate the presence of buyers. If this move creates enough upside momentum then look for the rally to possibly extend into the short-term 50% level at $38.22. This is a potential trigger point for an acceleration to the upside with the next potential target the minor 50% level at $39.96.
A sustained move under $36.91 will signal the presence of sellers. This could lead to a retest of $36.13. If this fails then look for the selling to possibly extend into the main bottom at $35.25.
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.