January West Texas Intermediate Crude Oil futures posted a strong gain last week despite running into selling pressure at $58.20, slightly below the high for the year at $58.21.
Helping to support the market were expectations of an extension of the OPEC-led plan to cut production and geopolitical tensions in the Middle East. Gains were limited by concerns over increasing U.S. production.
Additionally, Baker Hughes reported on Friday a rise in the number of producing wells. This could put early pressure on the market.
Weekly Technical Analysis
The main trend is up according to the weekly chart. The resistance is $58.21.
If enough buyers come in over $58.21 to sustain a rally then this could generate enough upside momentum to eventually challenge a major 50% level at $63.95.
Buyers could take out last week’s high at $58.20 and if the market turns lower, a potentially bearish closing price reversal top could form.
Maybe the buying won’t be strong enough to take out $58.20 before the selling starts. In this case a drive through last week’s low at $55.88 will make $58.20 a new minor top.
The main range is $46.95 to $58.20. If there is a correction then its retracement zone at $52.58 to $51.25 will become the primary downside target.
Weekly Technical Forecast
Based on last week’s close at $56.98, the direction of the market this week will be determined by trader reaction to $58.21.
There is room to the upside with $63.95 the next major target. However, if sellers take control then look for the start of a near-term correction.
The first downside target is last week’s low at $55.88, followed by an uptrending angle at $53.89. Since the main trend is up, we could see a technical bounce on the first test of this angle.
If $53.89 fails as support then look for the selling to continue into the 50% level at $52.58 and the uptrending angle at $52.58.
A short-term correction will not mean the trend is changing to down, but it may be necessary to alleviate some of the upside pressure.
In order to continue the rally, buyers are going to have to buy strength. If they don’t then this will signal that they want to buy value. The best value area is $52.58 to $51.25.
This article was originally posted on FX Empire
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