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Crude Oil Price Forecast: Drops to New Lows, Eyes Key Support

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WTI crude oil continued to weaken on Tuesday as it fell to a new retracement low of 72.73. Support showed up from there leading to an intraday bounce. That low put crude oil 17.3% below the most recent swing high of 87.89. Notice that today’s low was essentially bouncing off a bottom trend channel line. It was also just above the 78.6% Fibonacci retracement at 72.12. If today’s low is exceeded, that retracement level becomes the next lower target zone.

Also, keep an eye on the lower rising trendline that makes up part of a large developing symmetrical triangle type pattern with the apex around mid-September. Does this mean that crude oil may further trade within the boundaries of the rising and falling trendlines? Not necessarily. But it does mean that it will break out of that pattern before mid-September.

Bottom of Large Triangle Consolidation May Offer Support

The lower uptrend line will soon converge with the 78.6% retracement level presenting a more formidable potential support zone. Also, monthly support (daily swing low) from February was 71.38. It can be combined with the other price levels mentioned above to generate a larger support zone from 72.12 to 71.38. Notice that February’s swing low began an accelerated rally that peaked at 87.89 in April. Maybe a test of the February support zone will complete a round trip and set the stage for the next advance. However, a decline below 71.38 followed by further weakness will trigger a breakdown from the symmetrical triangle consolidation pattern.

Moving averages are showing turning bearish. Recently, the short-term 20-Day MA fell back below the 200-Day MA, and it continues to point down. The 50-Day MA has also begun to turn down. If it crosses below the 200-Day line, another bearish signal will be generated.

Rise Above Today’s High Will Show Strength, But Sustainability Questionable

On the upside, it wouldn’t be a bad idea to allow for a day or a few to occur to see how the market in crude develops. There are no current signs that a spike bullish reversal may be coming soon. An advance above today’s high of 74.39 will provide the next sign of strength. But, given the potential for a test of support at the bottom of the triangle and the lack of buying signs so far, it may not be sustainable just yet.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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