Crude Oil Update – Technically Oversold, but Supply Caps Gains

June West Texas Intermediate Crude Oil futures are trading higher shortly before the regular session opening as investors try to put an end to a six-session losing streak. The market is trading inside yesterday’s range which indicates investor indecision and impending volatility.

The clash between the fundamentals and the technicals may be causing the indecision. Fundamentally, increasing U.S. production is weighing on prices, but talk of an extension of the OPEC-led production cuts is providing a little support. However, the majority of traders don’t believe their actions are going to be strong enough to trim the global supply enough to support a rally.

Technically, most major oscillators are indicating the market is oversold, but that’s a relative term. The government is saying that the hedge and commodity funds are still long. They may be able to provide support if they keep buying on weakness, but if they are forced out of the market like they were in early March, we could see another steep sell-off.

Technical Analysis

The main trend is up according to the daily swing chart. However, momentum is trending lower. Taking out $47.58 will change the main trend to down. The market is down eight days from the last main top at 54.14. This puts it in the window of time for a potentially bullish closing price reversal bottom, or the start of a 2 to 3 day retracement.

The main range is $47.58 to $54.14. Its retracement zone at $50.09 to $50.86 is resistance. Trading below this zone is giving the market a downside bias.

The short-term range is $54.14 to $49.03. If there is a strong rally then its retracement zone at $51.59 to $52.10 will become the primary upside target.

Forecast

The current price is $49.34. The nearest support is a price cluster at $49.03 to $49.02.

If $49.02 fails as support then look for a break into the next uptrending angle at $48.30. This is the last potential support angle before the $47.58 main bottom.

On the upside, the nearest target is a resistance cluster at $50.09 to $50.14. Overcoming this resistance will indicate the buying is getting stronger with additional targets at $50.46 and $50.86.