February West Texas Intermediate crude oil futures are trading higher shortly before the regular session opening. Technical momentum and aggressive hedge fund buying continues to support the market although some skeptics believe the market is overheated and due for a correction.
Daily Technical Analysis
The main trend is up according to the daily swing chart. The trend resumed earlier today when buyers took out yesterday’s high. Due to the prolonged rally in terms of price and time, the most likely chart pattern to stop this rally is the closing price reversal top.
Now that we’ve had another higher-high on the charts, yesterday’s close at $63.57 becomes most important. An intraday break below this level will indicate the selling is greater than the buying at current price levels. A close below this level will form a potentially bearish closing price reversal top. This could trigger the start of a 2 to 3 day correction, or a 50% correction of the current rally.
Potential resistance today is the major, long-term 50% level at $64.02. Earlier today, buyers took out this level and hit $64.08 before pulling back to $63.98.
The new main range is $56.11 to $64.08. If the intraday high holds and a correction starts then its 50% level at $60.10 will become the primary downside target.
Daily Technical Forecast
Based on the early price action, the next move to the upside will be determined by trader reaction to the major 50% level at $64.02 and to the downside by yesterday’s close at $63.57.
Upside momentum could continue today on a sustained move over $64.02. However, momentum could shift to the downside if $63.57 is taken out with rising selling volume.
This article was originally posted on FX Empire
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