50-Day Support at Risk
Today was the second test of support at the 50-Day line since the breakout in June. The first test last Wednesday ended with a bullish hammer candlestick pattern, which triggered to the upside the next day. Subsequently, the advance reversed sharply to the downside once reaching resistance at the 200-Day MA. That was also a successful test of resistance at the lower rising trend channel. In other words, that was the first pullback following the decisive decline below the lower channel line. There was also a bear flag that triggered with the breakdown as well.
Strong Level From $65.65 to $65.00
Despite the bearish implications of recent price action, there is a potentially significant support zone around a range from $65.65 to $65.00. The range was either support or resistance previously and it includes an AVWAP level (light blue) starting from the April low. During the sharp drop from the trend high four weeks ago crude oil found support and bounced from the same AVWAP line. There is also a weekly low within the same range at $65.63.
61.8% Retracement at $64.50
Despite the potential for strong support, a decisive decline below $65.00 leads to the 61.8% Fibonacci retracement at $64.50, and possibly the 78.6% retracement at $60.71. A short-term ABCD pattern shows the potential for $64.42 being hit. That strengthens the possibility it could be achieved, since it is a match with the 61.8% level. What happens after the $64.50 price area is going to be key, if it is hit. Strong support may be seen leading to a bounce. Then, strength will be determined by how quickly the 50-Day MA can be recovered, if at all.
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