US West Texas Intermediate crude oil futures rose more than 3% on Friday, below the record high reached in October 2018. The rally was mainly fueled by Thursday’s decision by OPEC and its allies not to increase production in April. Prices continued to accelerate on Friday after the U.S. government released a report showing the U.S. economy created more jobs than expected in February.
On Friday, WTI crude oil for May stabilized at $ 65.92, up $ 2.30 or + 3.62%.
Despite the strong recovery, the market could start to face headwinds if the US dollar continues to rise. A strong greenback tends to reduce foreign demand for the dollar denominated asset.
Additionally, analysts and traders said sluggish physical crude sales and a pickup in demand that were only expected around the third quarter suggest the price rally is unwarranted.
Given the prolonged rise in price and time, the best sign of a major top will be a closing price reversal top chart pattern on the daily and weekly charts.
Technical analysis of the daily swing chart
The main trend is up according to the daily swing chart. A trade rising to $ 66.23 will signal a resumption of the uptrend, while a move to the main high on October 3, 2018 at $ 66.92 will reaffirm the uptrend.
The main trend will go down when moving to $ 59.08. It is not likely, but due to the prolonged rise in price and time, we should start watching for a dramatic reversal top in closing prices. This will not change the downtrend, but it will be an early indication that the sell is higher than the buy at current price levels. This could trigger the onset of a 2-3 day correction.
The new minor range is $ 59.08 to $ 66.23. Its $ 62.66 to $ 61.81 retracement area is the first bearish target.
Short term outlook
If you read my analysis daily, you will know that I am using the entire futures contract for my analysis rather than the nearby futures chart. I think it gives me more specific support / resistance levels and price targets. Using the nearby graphic creates problems as not everyone agrees on when to hover. On the first of the month, the last day, the first day of the rollover and sometimes when the volume drops, these are all used to determine the range of trading in the last month of trading.
Sometimes that’s right. This usually happens when there are no large price fluctuations during the month of delivery. But sometimes the highs and lows used are different if there are volatile price fluctuations during the delivery month.
This past May, when prices turned negative on the last trading day is one example. If you rolled over on the first day of notice, the low price does not exist. If you rolled over on the last day of trading, you see the lowest.
That being said, I prefer to use the entire negotiated contract. My May WTI crude oil chart shows that the contract high was reached on October 3, 2018 at $ 66.92. That’s my goal this week.
Withdrawing $ 66.92 could trigger an upward acceleration with the psychological level of $ 70 the next target on the upside.
Withdrawing $ 66.92 and then closing below $ 65.92 on Monday will form a closing price reversal high. If confirmed, it could trigger the start of a 2-3 day minimum correction. The sell-off could expand even further if the market forms a closing price reversal top on the weekly chart.
