December West Texas Intermediate crude oil futures are under pressure on Tuesday after the U.S. government said on Monday U.S. shale production in December would rise for a 12th consecutive month, increasing by 80,000 bpd and a cooling Chinese economy stoked some concerns about demand.
Additionally, in its monthly report, the International Energy Administration (IEA) cut its oil demand forecast by 100,000 bpd for this year and next, to an estimated 1.5 million bpd in 2017 and 1.3 million bpd in 2018.
Daily Technical Analysis
The main trend is up according to the daily swing chart. However, momentum has been trending lower since the formation of the closing price reversal top on November 8. The chart pattern was confirmed yesterday without much of a follow-through to the downside.
The chart pattern typically leads to a 50% to 61.8% retracement of the last rally.
A trade through $58.14 will negate the chart pattern and signal a resumption of the uptrend.
The short-term range is $58.14 to $56.52. Its 50% level or pivot is $57.33. Trading below this level is helping to give the market a downside bias.
The main range is $51.09 to $58.14. If the selling pressure continues then its retracement zone at $54.62 to $53.78 will become the primary downside target.
Daily Technical Forecast
Based on the early price action, the direction of the market today will be determined by trader reaction to the downtrending angle at $57.14.
A sustained move under $57.14 will signal the presence of sellers. Taking out $56.52 will indicate the selling is getting stronger. If this move takes place with rising selling volume then we could see an acceleration to the downside into an uptrending Gann angle at $57.14.
We could see a technical bounce on the first test of $57.14, but if it fails then look for a minimum break into the main 50% level at $54.62.
Overcoming the downtrending angle at $57.14 will indicate the return of buyers. This could lead to a labored rally with potential resistance targets at $57.33, $57.64 and $57.89. The latter is the last potential resistance angle before the $58.14 main top.
This article was originally posted on FX Empire
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