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Crude Oil Price Update – Price Action Indicates Short-Term Top Forming

James Hyerczyk

U.S. West Texas Intermediate crude oil futures fell on Tuesday, the last trading day of the decade, but still notched its biggest annual gain in three years. Traders said that profit-taking and end of the year position-squaring were probably behind yesterday’s weakness. The catalysts behind the annual rally were the easing of tensions between the United States and China after a prolonged trade war and the ongoing supply cuts from OPEC and other major oil producers.

On Tuesday, February WTI crude oil settled at $61.06, down $0.60 or -0.97%.

Daily February WTI Crude Oil

Daily Technical Analysis

The main trend is up according to the daily swing chart, however, momentum shifted to the downside with the formation of the closing price reversal top on Monday and Tuesday’s subsequent confirmation.

The chart pattern doesn’t indicate a change in trend, but it could lead to a 2 to 3 day break or a 50% correction of its last rally. Sometimes it just indicates the selling is greater than the buying at current price levels. This helps alleviate some of the upside pressure.

The minor trend is also up. A trade through $60.02 will change the minor trend to down. This will confirm the shift in momentum to down.

The main range is $63.87 to $50.24. Its retracement zone at $58.66 to $57.06 is the primary downside target. A pair of Gann angles at $58.13 and $58.07 pass through this zone, making them valid downside targets. Since the main trend is up, look for buyers to come in on a test of this area.

Short-Term Outlook

The combination of the closing price reversal top and the close under a downtrending Gann angle at $61.10 indicate the presence of sellers. If the selling pressure creates enough downside momentum then look for a test of the minor bottom at $60.02. If this selling pressure continues to build then look for the selling to possibly extend into the major Fibonacci level at $58.66.

Overcoming $62.34 will negate the closing price reversal top and signal a resumption of the uptrend. This would put the market in a position to challenge the April 22 top at $63.87.

This article was originally posted on FX Empire