Crude oil is consistently confusing traders, Price action on the daily chart is in range bound corrective – market structure. Whereas in monthly time frame, crude oil is testing an important support level 26.00, that’s under the radar of Institutional investors and traders. Any moves will be significant on monthly time frame. Looking from a big picture perspective, Crude oil is oversold and extremely bearish. Nonetheless, the market can still fall and break the key levels. Bearish climatic movements are by nature contains pessimistic attitude; recent selloff in crude oil is creating same psychology and behavior. The real question is, whether market has bottomed or will it fall further? The answer is in the charts and upcoming price action, also with an important deterministic organization known as OPEC. Any decisions or moves from OPEC in terms of geopolitics will be monitored closely by market participants; it can have tremendous impact on crude oil prices for the coming days.
From a technical perspective, Crude oil sold off rationally after testing pervious support level 35.00 and converting it into resistance, also known as Price flips or Role reversal. It’s a sign of bearish strength and selling pressure, but here we have to notice the climatic exhaustion of bears to sell every rally – whether big or small. Later Price action rebounded sharply from monthly support level 26.00 after testing it around mid February, suggesting new influx of buying pressure.
After crossing the 30.00 key level, buying pressure seems to have lost momentum and this was clearly indicated in lower time frame charts. The movement itself is not strong enough, but the interesting reason is we can’t notice any strong bearish candlestick interrupting the movement. This tells us about the state of market structure – Sellers are now willing to offer, only at higher prices. Price action is now testing the important resistance level 35.00, if sellers are strong enough, then price action shouldn’t penetrate the key level 35.00. No one can disagree that crude oil is in extremely oversold condition; Traders should watch the price action clues clearly before initiating any positions, it is essential to keep your eyes on important support and resistance levels, look at my chart above for support and resistance levels. Trade what you see, not what you think.
