Crude Oil Price Update – Sentiment Could Turn Bearish if $52.49 Pivot Fails as Support

U.S. West Texas Intermediate crude oil futures are trading nearly 2-percent lower on Monday as traders dismissed supply-disruption concerns over Venezuela, and shifted their attention back to traditional supply and demand fundamentals.

Supply is an issue because of rising U.S. production. This is likely to continue to increase over the near-term. Last Friday, Baker Hughes announced that 10 new rigs are producing. Demand is a problem because of the slowing global economy, particularly in China which is a huge consumer. OPEC and its allies are trying to trim the global supply and stabilize prices, but this move could be offset by a rise in U.S. production and a drop in Chinese demand.

At 0910 GMT, March WTI crude oil is trading $52.80, down $0.89 or -1.68%.

Daily Technical Analysis

The main trend is up according to the daily swing chart. However, momentum has been trending sideways-to-lower since the formation of the closing price top at $54.32 on January 22. A trade through this level will negate the reversal top and signal a resumption of the uptrend. This could trigger a further move into the next main top at $54.98. The main trend will change to down on a trade through $50.66.

The minor trend is up. It changes to down on a trade through $51.86. This will shift momentum to the downside. The new minor top is $53.94.

The short-term range is $50.66 to $54.32. Its 50% level or pivot at $52.49 is controlling the direction of the market today.

The main range is $42.67 to $54.32. If the main trend changes to down then look for the selling to eventually extend into its retracement zone at $48.50 to $47.12.

Daily Technical Forecast

Based on the early price action and the current price at $52.80, the direction of the March WTI crude oil futures contract the rest of the session is likely to be determined by trader reaction to the pivot at $52.49.

Bullish Scenario

The main trend is up so buyers are likely to come in on a test of $52.49. Overcoming the downtrending Gann angle at $52.73 will indicate the buying is getting stronger. If this can create enough upside momentum then we could see a surge into a resistance cluster at $53.67 to $53.86. Overcoming this area could put the market in a position to challenge the main top at $54.32.

Bearish Scenario

Taking out $52.49 could trigger an acceleration to the downside with $51.86 the next target. If this fails then look for the selling to intensify with the next target the main bottom at $50.66. Taking out this bottom will change the main trend to down. However, look for another acceleration to the downside if the market crosses to the bearish side of the downtrending Gann angle at $50.48.