Crude Oil Price Forecast: Falls Below 200-Day MA, Faces Bearish Momentum

Crude oil fell on Tuesday to test support around the 61.8% Fibonacci retracement with the day’s low of 77.50. That is the fourth day down in a row for crude and it included a breakdown below the 200-Day MA at 78.93. Although there was subsequently an intraday bounce, crude oil is set to close below the 200-Day MA for the first time since June 14.

This opens the possibility that crude may fall to the 78.6% Fibonacci retracement at 75.3 before finding strong support that leads to a bullish reversal. Notice that the prior retracement began from the April swing high and eventually found support a little above the 78.6% retracement.

Moving Averages Show Weakness

The purple 20-Day MA has turned down and the 200-Day line remains slanted down. These indications along with the clear bearish momentum that kicked in on Friday put the lower targets at risk of being reached. An internal upward sloping trendline has been added to the chart. Notice where it converges with the area around the 78.6% price zone. It can be used as an additional guide if that price zone is approached.

Trading Within Large Symmetrical Triangle Pattern

Crude oil has been trading within a relatively large symmetrical triangle. Now that a bearish retracement is in play there is a potential for it to fall and test support at the lower line of the triangle. It got close during the prior retracement. Nonetheless, at a minimum it increases the chance for a test of support around the slightly higher internal uptrend line, along with the 78.6% retracement zone.

Bullish Monthly Reversal Remains Valid

Regardless of short-term price behavior, gold triggered a bullish reversal on the monthly chart earlier in July. Whether this month closes weak or not, the bullish monthly signal remains valid, and it points to an eventual recovery in the price of gold and another challenge to recent highs of 84.74. Eventually, a breakout of the symmetrical triangle will occur, and the analysis currently looks to favor a bullish breakout.

If a bounce comes before a new retracement low, each of the moving averages will present a potential resistance level. Starting with the 200-Day line at 78.93, crude would then test resistance around the 50-Day MA at 80.03, and finally the 20-Day MA at 82.12.

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