Crude Oil Short-term Outlook: Oil Spill Searches for Support

Crude Oil Technical Outlook: WTI Short-term Trade Levels

• Oil rally falters into yearly high- breaks multi-month uptrend support
• Crude price pullback now approaching key technical support- risk for exhaustion low
• WTI resistance 80.31, 81.35, 82.84-83.24- Support 76.00/75 (key), 74.25, 71.75

Crude oil prices plunged more than 5.7% off the weekly high with a break of uptrend support in WTI now approaching a make-or-break pivot zone. Battle lines drawn as we look for a low into the close of the month. These are the updated targets and invalidation levels that matter on the short-term WTI technical charts.

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Crude Oil Price Chart – WTI Daily

Chart Prepared by Michael Boutros, Technical Strategist; WTI on TradingView

Technical Outlook: In last month’s Crude Oil Short-term Outlook we noted that WTI was approaching the yearly open with, “A topside breach / close above 80.31 needed to fuel the next leg higher towards the yearly / April high-day close at 83.24 and the next major pivot zone near 85.61-86.56 – a region defined by the 2013 low and the 38.2% Fibonacci retracement of the 2022 decline.” Oil continued to rally into the August open with price registering an intraday high at 84.87 before exhausting. An outside-day reversal candle off the highs broke the June uptrend days later and the focus has been on this corrective pullback.

Crude prices have now plunged more than 8% off the high with WTI approaching the first major support hurdle near 76.50/75- a region defined by the 100% extension of the monthly decline (two-equal legs), the 38.2% retracement of the yearly range and the 2018 swing high. Note that the 200-day moving average rests just lower (~76) and the focus is on a reaction into this key zone IF reached.

Crude Oil Price Chart – WTI 240min

Chart Prepared by Michael Boutros, Technical Strategist; WTI on TradingView

Notes: A closer look at oil prices shows WTI trading within the confines of a descending pitchfork formation extending off the monthly highs. Initial resistance now eyed back at 80.31 with near-term bearish invalidation now lowered to the objective weekly open at 81.35. Ultimately, a breach / close above the April / August high-day closes at 82.84-83.24 is needed to fuel the next attempt at a breakout of the yearly opening-range.

The immediate focus is on the 76.50/75 support range – IF this pullback off the highs is corrective in nature, losses should be limited to the 200-day moving average. Weakness beyond this threshold would threaten / suggest a larger trend reversal may be underway towards 74.25 and beyond.  

Bottom line: A break below multi-month uptrend is now approaching correction support – threat for downside exhaustion into the 200-DMA. From a trading standpoint, look to close short-exposure on a stretch towards 76 IF reached – losses should be limited to the lower parallel with a breach / close above the weekly open needed to alleviate further downside pressure. Review my latest Crude Oil Weekly Technical Forecast for a closer look at the longer-term WTI trade levels.

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--- Written by Michael Boutros, Sr Technical Strategist with FOREX.com

Follow Michael on Twitter @MBForex