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James Hyerczyk
WTI Crude Oil

U.S. West Texas Intermediate crude oil futures are edging higher early Wednesday after plunging the previous session. Yesterday’s steep break suggested that momentum had shifted to the downside, but today’s early price action suggests the market may just be testing the lower end of its two-week trading range.

At 08:08 GMT, December WTI crude oil futures are trading $39.25, down $0.31 or -0.78%.

Tuesday’s sell-off was fueled by the weekly report from the American Petroleum Institute (API) which showed an unexpected jump in gasoline inventory although a dip in distillate and crude oil stockpiles may have softened the blow. Today, at 14:30 GMT, the government will release its inventories data. Another jump in gasoline inventories could crush prices.

Daily December WTI Crude Oil

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through $37.11 will signal a resumption of the downtrend. The main trend will change to up on a move through the new main top at $42.02.

The main range is $44.33 to $37.11. Its retracement zone at $40.72 to $41.57 is resistance.

The minor range is $37.11 to $42.02. Its retracement zone at $39.57 to $38.99 is currently being tested. Counter-trend traders could try to establish support inside this zone.

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Daily Swing Chart Technical Analysis

Trader reaction to the retracement zone at $39.57 to $38.99 will determine the next major move in the crude oil market. A sustained move over $39.57 will indicate that traders prefer to hold the market in a trading range, while a sustained move under $38.99 will indicate that traders want to continue to probe lower for a better value area.

Bearish Scenario

A sustained move under $38.99 will indicate the presence of sellers. Taking out yesterday’s low at $38.70 will indicate the selling pressure is getting stronger. This could trigger an acceleration to the downside with the next major target the main bottom at $37.11.

Bullish Scenario

Holding $38.99 will indicate the presence of buyers, but the buying is going to have to be strong enough to overcome $39.57 to convince me that traders want to hold the market in a trading range.

If buyers can establish support over $39.57 then this opens up the possibility of an extension of the rally into the upper 50% level at $40.72.

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

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