Crude Oil Price Testing Key Retracement Zone at 3470 to 3565
Based on Friday’s price action and the close at 3359. The direction of the February crude oil futures contract on Monday is likely to be determined by trader reaction to the main 50% level at 343.
U.S. West Texas Intermediate crude oil futures were underpinned. On Friday on the hopes that the scheduled high level talks between the United States and China. January 7-8 would lead to a fast ending of the ongoing trade dispute. The market’s surge, however, was fueled by increased demand for higher risk assets. After dovish comments from Federal Reserve Chairman Jerome Powell ignited a huge stock market rally.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. However, momentum is trending higher. A trade through 3862 will officially change the main trend to up. While a move through 2995 will signal a resumption of the downtrend.
With this type of pattern, the first leg up is usually fueled by short-covering. And based on the latest government data, the hedge funds are still holding on to big short-positions. Bullish traders are trying to drive out some of the weaker shorts.
After the initial rally, we usually see a short-term pullback. This move is designed to set-up a secondary higher bottom while lowering the trend change level. In other words, we’re looking for a “W” chart pattern to form. This pattern would indicate that new buyers are coming in to support the market.
The minor trend is up. This led to the shift in momentum to up.
The main range is 3858 to 2995. The market is currently testing its retracement zone at 3426 to 3580. Since the main trend is down. Sellers are re-emerging on a test of this zone. They are trying to form another lower swing top.
The minor range is 2995 to 3570. If there is a correction from 3426 to 3570. Then the first downside target will be the short-term retracement zone at 3244 to 3124.
A sustained move under 3580 will signal the presence of sellers. If this move attracts enough sellers and creates enough downside momentum. We could see a break back to 3230 to 3110 over the near-term. This area should attract aggressive counter-trend buyers.