Crude Oil Weekly Technical Outlook

Written by Oil N' Gold | Sat Jul 04 09 04:39 ET
Nymex Crude Oil (CL)

After edging higher to 73.38, Crude oil reversed and fell sharply to close below key near term support of 66.25 at 65.63. There were two important implications from last week's move. Firstly, it was an outside week reversal. Secondly, break of 66.25 completed a double top reversal pattern (73.23, 73.38). Both developments, combing with the fact that daily MACD is now sustaining below it's own trend line, indicates that crude oil has at least topped out in short term, and probably in medium term too. In any case, deeper decline should now be seen this week to 38.2% retracement of 43.83 to 73.38 at 62.09 first. On the upside, above 67.21 minor resistance will turn intraday outlook neutral and bring recovery. But another fall should be seen after brief consolidation.

In the bigger picture, the case of reversal continues to build up with daily MACD staying below signal line and last week's doubt top reversal pattern. Focus will now turn to channel support at 58.80. Sustained break there will indicate that whole rise from 33.2 has completed at 73.83, ahead of 38.2% retracement of 147.27 to 33.2 at 76.77. The three wave structure of the rise from 33.2 to 73.83 will in turn indicate that it's part of wide range consolidation only and hence, will open up the bearish case for a retest of 33.2 low. On the upside, break of 73.83 is now needed to confirm that rise from 33.2 is still in progress. Otherwise, risks remain on the downside.

In the long term picture, note that fall from 147.27 is treated as a correction, or part of the correction/consolidation to the five wave sequence from 98 low of 10.65. The failure to sustain above 55 weeks and 55 months EMA argues that rise from 33.2 is merely part of the whole correction rather then reversal of trend. Break of above mentioned medium term channel will be a first alert that whole fall from 147.27 is resuming for another low below 33.2 below bottoming. Though, even in such case, we'd still expect strong support inside 17.12/37.0 support zone to complete the correction. On the upside, note that sustained trading above the 55 weeks and 55 months EMAs will affirm the case that whole correction from 147.27 has completed and should set the stage for key level of 90, (50% retracement of 147.27 to 33.2 at 90.23).