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July West Texas Intermediate Crude Oil futures started the week under pressure, confirming last week’s closing price reversal top. This potentially bearish chart pattern typically fuels the start of a 2 to 3 week correction equal to at least 50% of the last rally.
Weekly Technical Analysis
The main trend is up according to the weekly swing chart. However, the closing price reversal top signaled a shift in momentum to the downside. A new main top has formed at $72.90.
A trade through $72.90 will negate the reversal top and signal a resumption of the uptrend.
Crude oil is currently trading inside a major retracement zone at $64.77 to $70.60. This zone is controlling the longer-term direction of the market.
The short-term range is $55.45 to $72.90. Its retracement zone at $63.77 to $61.81 is the primary downside target.
The combination of the two retracement zones creates a support cluster at $64.77 to $63.77. Since the trend is up, buyers are likely to come in on a test of this area.
The main range is $44.98 to $72.90. Its retracement zone is $58.94 to $55.65.
Weekly Technical Forecast
Based on the early price action this week, the direction of crude oil the rest of the week is likely to be determined by trader reaction to the uptrending Gann angle at $67.45.
A sustained move under $67.45 will indicate the presence of sellers. If the selling pressure continues this look for a move into the potential support cluster at $64.77 to $63.77. Watch for a technical bounce on a test of this area.
If $63.77 fails then look for the selling to extend into the next support cluster at $61.81 to $61.45. Once again, buyers could show up on a test of this area.
Overcoming and sustaining a rally over $67.45 will signal the return of buyers. If this creates enough upside momentum then look for the rally to extend into the next uptrending Gann angle at $69.48.
Overtaking $69.48 will indicate the buying is getting stronger. This could lead to a retest of the major Fibonacci level at $70.60.
Watch the price action and read the order flow at $67.45 all week. Trader reaction to this Gann angle will tell us if the buyers or sellers are in control.
This article was originally posted on FX Empire