In today’s oil price forecast, I decided to share with you my insights from today’s Oil Trading Alert. Have a nice read!
January 31, 2025
Crude oil futures extended their losses, but how could they go?
Technical Picture of Crude Oil
The first thing that catches the eye on the daily chart is today’s breakdown under the lower border of the blue consolidation. Yesterday, we saw similar price action, but the bulls came back to the trading floor and invalidated the earlier tiny breakdown below the lower line of the formation.
Therefore, in my opinion, further deterioration will be more likely and reliable if the bears manage to finish today’s session under the mentioned formation.
What could happen in this case?
We’ll likely see a test of the nearest support – the green gap ($71.72-$71.85) from the beginning of the month, which is slightly above the next supports – two green horizontal support lines based on the late Nov. 2024 and mid-Dec. 2024 peaks.
At this point, it is worth mentioning that the daily CCI and the Stochastic Oscillator moved to their oversold areas, suggesting that the space for declines may be limited, and reversal in the coming week can’t be ruled out.
Nevertheless, before we see such price action, let’s take a closer look at the 4-hour chart.
Let’s start with the quote from Wednesday:
(…) when we take a look at the current position of the 4-hour indicators, we see that the Stochastic Oscillator generated a sell signal, suggesting that we could see a test of the lower border of the green rising trend channel (marked with dashed lines) or even lower border of the blue consolidation, which intersects the lower line of the orange declining channel.
From today’s perspective, we see that the situation developed in line with the above scenario and crude oil crude oil futures extended losses after the last alert was posted.
Thanks to yesterday’s drop, the lesser tested the lower line of the orange channel, but it withstood the selling pressure, triggering a rebound to the upper line of the formation.
Despite this increase, the upper border of the channel lured the sellers once again, which translated into another pullback and drop below the nearest supports (the 50% Fibonacci retracement, the previously broken Nov.7, 2024 intraday peaks and the Jan.3 & Jan. 9 lows). This negative technical development triggered further deterioration earlier today and the futures hit a fresh local low of $71.94.
What can we expect next?
Taking into account the sell signal generated by the 4-hour Stochastic Oscillator, it seems that as long as the futures are trading under the previously broken lower line of the blue consolidation and the green support/resistance line based on the Dec.2024 lows (the lower border of the above-mentioned green rising channel) another downswing can’t be ruled out.
If this is the case and the bears attack once again, their next target will likely be the green support zone (marked with the green ellipse) based on the 61.8% Fibonacci retracement and the previously broken Dec.13, 2024 peak (at around $71.43-$71.46).
Summing up, oil bulls failed to break above the upper border of the orange declining trend channel, which translated into another downward move and the breakdown under the nearest important supports. Additionally, the 4-hour Stochastic Oscillator re-generated a sell signal, suggesting that one more downswing and a test of the next support area (which is currently intersected by the lower border of the mentioned orange channel) can’t be ruled out.
Have a profitable day and wonderful weekend.
Anna Radomska