Nearby Crude Oil Monthly Technical Analysis for August 2015

Crude Oil futures plunged in July, falling over 20% from June’s close. The market was hit with almost a perfect storm of bearish fundamentals including increased OPEC and U.S. production, the Iran nuclear deal which lifts sanctions and allows the country to sell oil on the free market, and turmoil in China’s financial markets.

The main trend is down on the monthly swing chart. Last month, sellers took out the previous main bottom at $49.69, making $64.45 a new main top. A trade through this level will turn the main trend to up.

Based on the current downside momentum, the first objective is $45.00. This is followed by the psychological $40.00 level.

Overcoming the previous bottom at $49.69 will signal the presence of buyers. This could trigger the start of a strong short-covering rally.

Based on the weak close and the bearish fundamentals, crude oil will open the month with a downside bias. Oversold conditions could fuel periodic short-covering rallies. Don’t look for any prolonged rallies to take place, however, until either the U.S. or OPEC agree to cut production.