In today’s oil price forecast, I decided to share with you my insights from today’s Oil Trading Alert. Have a nice read!
Closed gap, bulls’ weakness and the next bears’ targets.
Technical Picture of Crude Oil
Let’s start today’s analysis by quoting the last Oil Trading Alert:
(…) Monday’s higher open (Asian trading hours), created a big green supportive gap on the chart ($72.53-$74.84).
Despite this improvement, oil bulls only managed to push the price to the upper border of the above-mentioned blue consolidation, but there was no breakout above it, which showed that the buyers may not be as strong as it could seem at the first glance.
(…) considering today’s bulls’ lack of strength to push the price above the upper borders of the consolidations (marked on both charts), it seems that verification of the earlier breakout above the short-term red support/resistance line should not surprise us.
From today’s point of view, we see that the situation developed in accordance with the pro-declining scenario, and the bears not only reached the mentioned target but also broke below it.
Thanks to this price action, the sellers invalidated the earlier breakout above the mentioned line (the upper border of the red declining trend channel), which triggered further deterioration earlier today.
As you see on the daily chart, crude oil futures opened Tuesday with a big red pro-declining gap ($72.37-$73.16), which just makes the bears even more determined to push the futures for lower levels.
As a result, the price declined not only under the green supportive gap from the beginning of Jan. but also below the next supportive gap from Dec.31, 2024, and the 61.8% Fibonacci retracement (based on the entire mid.-Nov. 2024 – mid. Jan 2025 upward move).
Today’s gap, in combination with all the above-mentioned negative technical developments, suggests that further deterioration and a test of the previously broken barrier of $70 may be just around the corner.
Before we summarize today’s short alert, please keep in mind that this psychologically important level is currently intersected by the lower border of the red declining trend channel (marked on the 4-hour chart), which could cause further declines later in the day.
Nevertheless, if these levels fail to stop the bears, we could see a test of the 78.6% Fibonacci retracement (at around $69.50) and the bottom of the correction that we could observe at the end of 2024 (Dec. 26 low of $69.33).
Summing up, oil bulls failed to break above the upper border of consolidations on Monday, which translated into a sharp downward move and invalidation of the earlier breakout above the upper line of the red declining trend channel. This show of the bulls’ weakness translated into a red pro-declining gap, which triggered further deterioration and took the price under important support, suggesting that the worst is yet to come for the buyers and a test of the barrier of $70 should not surprise us.
Have a profitable day, and see you tomorrow.
Anna Radomska