Crude Oil Price Outlook: Turning Back Towards Support
Crude Oil Technical Highlights:
- Broke upward channel structure, heading lower
- Support dating to 2011 could soon come into play
To start the month WTI crude oil snapped the upward channel dating to the August low, and then tested the underside parallel of the pattern to start the week. The failure to recapture the channel and new highs has oil falling back lower. Snapping channel structures doesn’t in of itself mean a trend change, but can signify that a corrective period is underway.
Earlier in the week I touched on oil in a macro tech video and said we should continue to respect the upward trend. This still holds true on an intermediate-term scale, but the risk of a seeing a decline to lower levels is quickly rising with momentum fierce off the weekly high.
Watch for signs that the monthly low at 78.25 wants to hold, it could put in a floor for an extended period of range activity that builds a base for a rally later on. It would be a healthy development in the bull market.
If the monthly low breaks there is strong support not far below that threshold to watch for signs of stabilization. Going back as far as 2011 the area right around 77 has been an important one as both support and resistance. The most recent test as resistance was in July before oil underwent an extended correction.
A test and reversal off this macro level could offer up would-be longs an opportunity to join the trend higher, that also provides a backstop for stop placement. A slice through the level would warrant caution from the long side and indicate that oil is undergoing another extended correction.
Crude Oil (CL1!) Daily Chart
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.