On Tuesday, July 2, 2019, the price of Crude Oil fell over -4.5% on continued expectations of global economic weakness and supply gluts. We found this interview rather interesting because it attempts to suggest a narrative that ignores Iranian issues while pushing the supply side fundamental for the current price decline (Source: CNBC).
Back on May 21, 2019, we shared a post that is still very relevant today. The same price pattern is still in place and the same type of price action is working through the completion of an extended Pennant/Flag formation. We suggest all our follower read this May 21 post to catch up to current market levels.
May 21, 2019, Technical Analysis Post:
GLOBAL ECONOMIC TENSIONS TRANSLATE INTO OIL VOLATILITY
Our researchers believe the technical reason why Crude Oil will continue lower is that price rotation has continued to support a downside price trend (Bearish) and that recent price resistance near the upper price channel has been rejected. This is a near perfect example of how the Fibonacci price theory works in real markets. The price must always attempt to establish “new price highs” or “new price lows” AT ALL TIMES.
After the deep price bottom in December 2018 near $42.50, oil price began an upside price move reaching just above our $66 target in late April 2019. Since then, another downside price move, which we called in our May 21 article, has driven oil prices to the $50.60 level. The current upside price move has recently retested the $60 resistance level and has pulled back to where we are today around $56 per barrel.
The price rejection and subsequent collapse in price on July 2 represents a clear rotation from the $60 price level. This failure to achieve a “higher high” price level ($60 is lower than the previous peak near $66) is a very clear indication that price MUST move lower in an attempt to establish a new “lower low” – near or below $50.60. This is how the Fibonacci price theory works.
We believe the last level of support for Oil is currently near $54.50. If this level is breached, we should see a very clear and quick price move lower targeting the $50.60 to $52.50 level where historical support resides. If that level fails, then a move to deeper historical support, near $42 if very likely.
Everything hinges on what Oil will do near the $54.50 level as the price continues to push lower from the recent peak near $60. Technical traders should be prepared for a bit of volatility over the next few days, but we believe the $54.50 level will be breached and that oil prices will continue to fall back towards the previous low price level near $50.60. If price fails to find support there, it really has only one target left to reach – that is the $42 level.
CONCLUDING THOUGHTS:
In a previous article, we’ve shown you when the bottom was in for oil and stocks using our simple trade setup technique we use to identify entry and exit points for SP500 and Crude Oil – the 100% Fibonacci Extension Move. Now a month later we are providing more insight about oils potential drop to $42 if support is broken.
If the price drops below $52 would also create selling pressure as the price will have fallen below the 200-period historical moving average level. This technical condition would suggest price weakness to the masses and could result in additional selling pressure from traders exiting the oil market and potentially even short selling pressure.
Technical traders should have all eyes focused on the $54.50 price level right now. That is the key price level for any future move in Crude Oil as it is oversold currently and near support. Either way, up or down, Crude Oil continues to be an incredible opportunity for skilled technical traders.
I can tell you that huge moves are about to start unfolding not only in crude oil, but real estate, metals, stocks, and currencies. Some of these super cycles are even going to last years. Brad Matheny goes into great detail with his simple to understand charts and guide about this. His financial market research is one of a kind and a real eye-opener. PDF guide: 2020 Cycles – The Greatest Opportunity Of Your Lifetime
As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for both short-term swing trading and long-term investment capital. The opportunities are massive/life-changing if handled properly.
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