In today’s oil price forecast, I decided to share with you my insights from today’s Oil Trading Alert. Have a nice read!
Verification of the breakout and its implications.
Technical Picture of Crude Oil
Let’s start today’s analysis by quoting Monday’s Oil Trading Alert:
(…) How low could the futures go in the coming week?
If the bears manage to break below $70, their next downside target will be around $76.72, where the 38.2% Fibonacci retracement (based on the entire Dec.6-Dec.13 upward move) is. In the case of the breakdown below it, the next target for the sellers will be the previously broken upper border of the black triangle (currently at around 69.45) or even a re-test of the Thursday’s low of 69.14, which is currently intersected by the 50% Fibonacci retracement (based on the entire Dec.6-Dec.13 upward move).
From today’s point of view, we see that the situation developed in accordance with the pro-declining scenario and the bears reached the mentioned targets during yesterday’s session.
As you see on the above charts, the combination of the upper border of the black triangle and the 50% Fibonacci retracement lured the buyers to the trading floor and encouraged them to fight for their allies.
Thanks to their mobilization, crude oil futures bounced of the triangle once again and invalidate the earlier small breakdown under the mentioned Fibonacci retracement. These positive developments triggered further improvement and a climb to the lower border of the red gap created at the beginning of Asian session.
As it turned out, this resistance was strong enough for the bulls, which translated into another lower open and a comeback to the previously broken 38.2% Fibonacci retracement (based on the Dec.13-Dec.17. downward move).
After short consolidation oil bulls gathered enough strength to move north again. As a result, the futures re-tested the lower border of the mentioned red gap, approaching the 61.8% Fibonacci retracement before the U.S. market open.
What can we expect next?
Although the buy signals generated by the 4-hour indicators remain in the cards, supporting the bulls and higher prices, the combination of the above-mentioned resistances doesn’t look encouraging – especially when we factor in the orange gap from Monday and the solid resistance zone seen from the daily perspective.
Therefore, even if the bulls manage to push the price higher in the following hours, in my opinion, as long as the mentioned gaps remain open the way to the north is not wide open and opening long positions at these levels can be a risky decision. That's why waiting at the sidelines for more reliable signals as to the direction of the next bigger move seems to be the best idea at the moment.
Summing up, although crude oil futures moved to the 61.8% Fibonacci retracement, both Monday and Tuesday price gaps remain open, blocking the way north. Therefore, in my opinion, waiting at the sidelines for more reliable clues about the next bigger move seems justified from the risk/reward point of view.
Have a profitable day and see you tomorrow.
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Anna Radomska