Oil Prices regained some momentum last two days after falling below $40 per barrel earlier this week. Oil was under pressure after market participants worried about global supply glut and economic condition of consumer nations. Prices rebound back above $40 as speculators attempted to balance consecutive declines and uncertainty. Profit taking and Liquidation is driving the current price action. The focus in the oil market has once again shifted to supply glut as Traders expected Supply – demand to reach equilibrium later this year – But thesis came under critical scrutiny.
Technical analysis of Crude Oil for Price action trading
1. Crude oil sold off from $46.10 to $39.25, the move lasted for a week, until prices took support at $39.25 on 3rd August.
2. As I pointed out in earlier article, Bears failed to push lower after market crossed $40 zone, resulted in corrective retracement.
3. Market bounced back from support zone $39.50-39.25 indicating the presence of buyers. Traders should see how selling pressure reacts after price action tests the resistance levels.
4. From the perspective of market structure, we can notice that crude oil has formed a counter trend pattern. I have highlighted the Pattern on right hand upside corner.
5. Gauge the strength of buying and selling pressure when price tests the key levels. Also keep an eye on Supply reports and Economic conditions. Next week’s price action can give more clues about the structure and market direction.
The focus is shifted back to Supply – Glut, now the crude oil will be sensitive to Geopolitical events, OPEC report and rising inventories.
