Crude Oil Price Talking Points:
- Sellers haven’t left the Crude Oil market after a brutal month of May. The latter-half of last week saw prices bounce from a key support zone, but sellers re-appeared this week after prices touched the resistance zone looked at in the early-month forecast for Crude Oil Prices.
- Crude Oil has pushed down to the 51.50 area that was looked at for an initial target, but might bears be aggressive enough to elicit a run down to the 50 psychological level?
Crude Oil Collapse Continues After Resistance Inflection
Crude Oil prices experienced a stark change-of-pace in the month of May. While Oil prices had previously tracked the return of the risk trade fairly-well, bottoming out around Christmas and running-higher through Q1 and into April; sellers showed up in May, with aggression, to erase a large portion of that move. In short order, Crude Oil prices had cut through a number of support levels, making a hard-charge down to fresh four-month-lows.
In the Crude Oil Technical Forecast to start this month, I had looked at a series of levels that remain in-play. The resistance zone investigated that runs from 54.49-55.57 has now caught two different resistance reactions. The support level around 51.50 that was looked at for initial targets has now caught two separate inflections; the first of which was a mere speed bump on the way-lower while the second is helping to hold the lows right now.
WTI Crude Oil Four-Hour Price Chart: From Resistance to Support – Now What?
Chart prepared by James Stanley
Crude Oil Prices: More Room to Fall or Ready to Retrace?
At this point, the big question is whether the short-side move has anymore juice left to squeeze, and it may. But at this point, initiating fresh bearish exposure could be of a challenge considering how far away prices have fallen from the recent swing-high.
This can then present a few differing scenarios:
With current prices showing support at a confluent area on the chart, and with sellers thus far showing an unwillingness to test last week’s lows, and the door may be opening for a retracement move given this current higher-low to go along with last week’s higher-high. This bounce may run up to the 52.50 psychological level or perhaps even the 53.00 level which provided a bit of swing support on Monday. These levels can function as near-term targets on reversal/retracement plays or, alternatively, can be integrated by sellers as areas to look for lower-high resistance potential.
WTI Crude Oil Price Two-Hour Chart
Chart prepared by James Stanley
On the short side of the move, the current quandary would be one of chart position. With resistance almost a full $3 away, the risk would simply be difficult to justify given price action’s proximity to support. If sellers are able to break to fresh lows, the 50 psychological level awaits; and incorporating a simple one-to-one risk-reward would necessitate a push down towards 48.50, which could be difficult to target given the number of events that would likely need to happen to elicit a clean cut through all of that support.
Instead, sellers can look for a bounce up to one of the aforementioned resistance levels or, alternatively, look for downside breakout strategies in order to capitalize on a ‘fear’ theme that hasn’t yet left Crude Oil markets. A break-below this week’s low at the 51.47 Fibonacci level opens the door for a test of last week’s low; after which the 50 level comes into play for short-side target potential.
WTI Crude Oil Eight-Hour Price Chart
Chart prepared by James Stanley
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--- Written by James Stanley, Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX
