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After surging to a multi-year high earlier in the week, August West Texas Intermediate crude oil futures are now trading lower for the week, signaling the selling may be greater than the buying at current price levels, while putting the market in a position to form a potentially bearish closing price reversal top.
Although the chart pattern doesn’t indicate the trend is getting ready to change to down, it does indicate a shift in momentum to the downside. If formed and confirmed next week, it could lead to a 2 to 3 week correction.
Weekly Technical Analysis
The main trend is up according to the weekly swing chart. The trend will change to down on a trade through $63.40, but a close under $74.15 on Friday will form the closing price reversal top.
On the downside, the main support is a long-term 50% to 61.8% retracement zone at $70.51 to $64.67.
The new short-term range is $63.40 to $75.27. Its retracement zone at $69.34 to $67.93 is another potential downside target.
Weekly Technical Forecast
Based on the price action this week and the current price at $73.86, the direction of the August WTI crude oil futures contract the rest of the week is likely to be determined by trader reaction to last week’s close at $74.15.
A sustained move over $74.15 will indicate the presence of buyers. This could lead to a retest of this week’s high at $75.27. Overtaking this level could trigger a rally into a long-term downtrending Gann angle at $76.40.
We could see a technical bounce on the first test of $76.40, but if buyers take it out with conviction then look for an acceleration to the upside with the next near-term target the November 2014 main top at $81.09.
A sustained move under $74.15 will signal the presence of sellers. The first downside target is a steep uptrending Gann angle at $71.40. Since the main trend is up, buyers could come in on a test of this angle. If it fails then over the next 2 to 3 weeks, the market could correct into the long-term Fibonacci level at $70.51, followed by the short-term retracement zone at $69.34 to $67.93.
Watch the price action and read the order flow at $74.15 the rest of the week. Trader reaction to this level will tell us if the buyers are still in control, or if the sellers are taking over.
This article was originally posted on FX Empire