U.S. West Texas Intermediate crude oil futures opened $5.36 higher on Sunday then rallied to $9.09 higher before retreating back to the opening. The gap opening and the volatility were expected.
The gap was set in motion after drone strikes over the week-end on Saudi Aramco facilities in Abqaiq and Khurais eliminated 5.7 million barrels of production. The volatility was fueled by uncertainty over how fast the Saudis can repair the damage. The Wall Street Journal reported Sunday, citing Saudi officials familiar with the matter, that Saudi Aramco is aiming to restore by Monday about a third of its crude output.
At 22:45 GMT, November West Texas Intermediate crude oil futures are trading $60.51, up $5.71 or +10.35%.
Continue to look for volatility and be willing to accept the possibility of a two-sided trade since traders may not know for another 48 hours when the Saudis will be able to restore production.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. The trend turned up on the opening when buyers gapped through the swing tops at $58.64, $60.77 and $63.52. The main trend will change to down on a trade through the last swing bottom at $53.93.
The major range is formed by the October 3, 2018 main top at $73.52 and the December 24, 2018 main bottom at $45.05. Its retracement zone at $59.29 to $62.64 was taken out shortly after the opening, but the market has since settled into a range near the bottom of this range.
The early trade makes $59.29 support and $62.64 resistance.
The short-term range is $53.93 to $63.89. If the support fails at $59.29 then look for the selling to possibly extend into the short-term retracement zone at $58.91 to $57.73. If the lower or Fibonacci level at $57.73 fails as support then look for further downside pressure.
Daily Swing Chart Technical Forecast
The market seems to be seeking a balance inside $59.29 to $62.64. Trader reaction to the upper and lower levels of the major retracement zone will likely determine the next major moves
Since the main trend is up, buyers could come in on a test of the major 50% level at $59.29 and the short-term retracement zone at $58.91 to $57.73. The move could be over if $57.73 fails as support.
Taking out $62.64 will indicate the buying is getting stronger. However, trader should still be careful about buying strength or breakouts unless the buying volume is increasing with the move.
This article was originally posted on FX Empire
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