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Crude Oil Prices Get Hit to Key Support – More Room to Fall?

Crude Oil Prices Get Hit to Key Support – More Room to Fall?

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Crude Oil Price Talking Points:

Technical Forecast for Crude Oil Prices: Bearish

Crude Oil Bears Re-Grab Control

Oil bears got back in the driver’s seat this week, pushing prices below the 60-handle and all the way down for a revisit of 55. While early July had brought a recovery bid, hastened through last week on the prospect of supply disruptions in the Gulf, this week marked a pronounced one-sided move as sellers retained control for much of the period.

Monday’s price action saw the build of a bear flag formation after prices had perched below that key resistance zone that runs from 59.64-60.00. After a quick trip back up to 60 for a resistance check, prices were smashed-lower, breaking below the flag and quickly filling-in both targets looked at in the article, Oil Price Outlook: WTI Crude Oil Price Action Builds Bear Flag.

WTI Crude Oil Hourly Price Chart

WTI Price

Chart prepared by James Stanley

At this point, WTI crude oil price action is testing a big zone of support that contains a number of Fibonacci levels. At 55.57 is the 38.2% retracement of the October-December 2018 sell-off. At 54.49 is the 50% marker of the recovery move from that sell-off, spanning from the December low up to the April high; and in between the two is the psychological level of 55, which appears to be helping to stem the bleeding after a brutal week for oil bulls. Collectively, this zone combined with corresponding price action could allow for a move-higher, but the bigger question is whether that bounce has the prospect to turn into something more? More likely, this would be a more attractive theme for short-side stances, looking for that bounce to create a lower-high from which bearish trend strategies could come back into favor.

WTI Crude Oil Four-Hour Price Chart

WTI Price

Chart prepared by James Stanley

Taking a further step back on the chart, and that zone of prior support from early-July has started to show as resistance potential. Should this current zone of resistance hold through next week’s open, the door could quickly re-open for short-side trend strategies. This would be a rather aggressive area to look for bearish exposure, particularly considering how aggressively that theme has priced-in. A bit-higher is another area of potential interest for lower-high resistance, and this runs around the same 57.50 area that was looked at coming in the month of June for short-side target potential. Since that scenario played out six weeks ago, a number of support/resistance inflections have shown here, and this keeps this area on the chart as a spot of interest.

Below current price action and should this zone of support around 55 give way, the area around the June swing lows appears attractive, and this runs from 50.54-51.64. Along the way, potential support levels around 53.25 and 52.50 could be used as shorter-term profit targets for near-term strategies.

WTI Crude Oil Eight-Hour Price Chart

Crude Oil Price

Chart prepared by James Stanley

To read more:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts have a section for each major currency, and we also offer a plethora of resources on Oil or USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.

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--- Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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