Crude Oil

Crude Oil Price Update – Oversold Market Ripe for Counter-Trend Rally

July West Texas Intermediate Crude Oil futures are trading higher after consolidating earlier in the session. Oversold conditions are contributing to the move as well as aggressive counter-trend buying. This is essentially investors betting on a rally.

Despite the bearish fundamentals, the hedge funds and commodity money managers are at it again. According to the latest Commitment of Traders (COT) data released on Friday by the Commodity Futures Trading Commission (CFTC), large speculators added to their bullish net positions in the U.S. WTI crude oil futures market last week for a four consecutive week.

West Texas Intermediate Crude Oil
Daily July West Texas Intermediate Crude Oil

Technical Analysis

The main trend is down according to the daily swing. We’re far from turning the main trend to up, but we could see a normal retracement of the recent break over the near-term. This would actually set up the next short-selling opportunity.

A trade through $45.29 will signal a resumption of the downtrend. This could trigger an acceleration into the next main bottom at $44.13.

The main range is $44.13 to $52.00. Its retracement zone at $47.14 to $48.07 is the first key upside target.

The short-term range is $52.00 to $45.29. Its retracement zone at $48.65 to $49.44 is another potential upside target.

Forecast

Based on the current price at $46.51 and the earlier price action, the direction of the July WTI futures contract is likely to be determined by trader reaction to the downtrending angle at $46.50.

A breakout and sustained move over $46.50 will signal the presence of buyers. This could generate enough upside momentum to challenge the Fib level at $47.14 and the uptrending angle at $47.26.

Over taking $47.26 could trigger an acceleration into the 50% level at $48.07.

A failure to overtake the angle at $46.50 will indicate the presence of sellers. This could lead to a retest of the uptrending angle $45.69. This angle provided support the last two days. If it fails then look for the selling to extend into $45.29 then another uptrending angle at $44.91. This is the last potential support angle before the $44.13 main bottom.

Watch the price action and read the order flow on a test of $46.50. Trader reaction to this angle will tell us if the buying is getting stronger or if sellers are maintaining control.

Published by

James Hyerczyk

James A. Hyerczyk has worked as a fundamental and technical financial market analyst since 1982. His technical work features the pattern, price and time analysis techniques of W.D. Gann.