Oil Price Forecast – How Far Will Oil Fall Before Buyers Step In?

Crude oil has been falling for the past month, reaching a low of $49.64 so far on Tuesday. It has lost as much as 24.29% of its value since the most recent swing high of $65.62 reached in early-January.

Next Support Area

The next area to watch for support that could stop the decline is around the trend line shown in the enclosed daily chart. It’s placed at the lower boundary of a multi-month price consolidation phase.

If that price area (approx. $49.30 currently) is exceeded to the downside then the next key area to watch is around $47.57 to $47.06, consisting of the 78.6% Fibonacci retracement and 127.2% Fibonacci extension, respectively. Given the confluence of those two measurements and the relentless decline in oil, it may be a good area to watch for entries more aggressively. Of course, relative to one’s engagement strategy and risk parameters.

Watch for Reversal Signs

Nevertheless, signs of a possible reversal in trend could come at other price areas based on changes in price pattern. So far, there are no signs for such reversal.

On a daily basis the downtrend remains well in place, and on also on an intraday basis. Daily, we continue to see a series of lower daily highs and lower daily lows. A break above a completed daily high candle and subsequent daily close above it, will be the first indication on a daily basis that something might be changing.

Intraday Trend Pattern

Intraday, there is still a series of lower swing highs and lower swing low. This can be seen on the following 2-hour chart.

Recently, the declining 50-period exponential moving average (ema) has done a good job of marking resistance of the trend on a dynamic basis. It can be watched as we move forward in time and used for a new sign of resistance and subsequent bearish continuation. Or, watch to see if price moves above it for an early sign of strength coming into oil.

Signs of Strength

At this point the more significant swing high would be around the $54.35 area, as the subsequent swings are a bit less prominent. Regardless, the more minor swings can be used for signs of strength, including the most recent $51.95, and higher $53.33.