Bounce Completes First Phase
In addition to indications from the 20-Day MA, the top of the rally at $65.32 was a test of prior long-term support (red highlight) as resistance and signs of resistance were clear. The trend high day last Wednesday ended with a bearish engulfing pattern. It was followed by a minor rally that found resistance around the 20-Day MA yesterday, but at a lower price since the line continues to fall.
Lower Support Levels
Crude oil looks certain to test an interim swing low and 50% retracement at $60.40 and $60.27, respectively. And it may still do so before the Tuesday’s ends. Since the bearish flag breakdown only triggered today, it seems likely that crude will fall through that price area. The $60.27 price level is also a prior weekly support level and a drop below it will reflect further bearishness on the larger time frame weekly chart.
If $60.27 does fail as support, the next lower area to watch for support is marked from $59.08 to $58.86, consisting of the 61.8% Fibonacci retracement at $59.08 and a previous daily low $58.86. Still lower is the 78.6% Fibonacci retracement at $57.39.
Near-term Upside Resistance
Alternatively, if support is seen around either of the price areas identified above, the subsequent rally will rise into potential resistance from the flag consolidation pattern. Key levels will be around recent daily lows of $61.83 to $62.22, while the 20-Day MA is now at $63.26.
For a look at all of today’s economic events, check out our economic calendar.
