Crude Oil Price Update – Closing Price Reversal Bottom Confirmed; Reaction to $37.77 Will Dictate Next Move

West Texas Intermediate crude oil futures are trading sharply higher for a second day as traders continued to ride the tail of three stronger-than-expected manufacturing PMI reports from China, the Euro Zone and the United States, released on Monday.

The short-covering rally is also being fueled by increased demand for risky assets as investors continue to bet on a Joe Biden victory in today’s U.S. presidential election. The possibility that OPEC may postpone its planned reduction of production cuts is also providing some support.

At 15:13 GMT, December WTI crude oil futures are trading $38.19, up $1.38 or +3.75.

Perhaps keeping a lid on prices are concerns over surging coronavirus cases around the world. Italy became the latest country in Europe to tighten COVID-19 restrictions, including limiting travel between the worst-hit regions and imposing a nightly curfew, which will limit fuel demand.

Oversold conditions may also be contributing to the rally. Last week, several analysts were writing about how bearish the market was. It was the easy thing to do, but when the market reversed to the upside and the work got harder, they have had nothing to offer.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, but yesterday’s dramatic closing price reversal bottom and today’s confirmation of the chart pattern, shifted momentum to the upside.

A trade through $33.64 will negate the chart pattern and signal a resumption of the downtrend. The main trend will change to up on a move through $41.90.

The minor trend is also down, a trade through $39.83 will change the minor trend to up. This will confirm the shift in momentum.

The main range is $25.31 to $44.33. Its retracement zone at $34.82 to $32.58 is support. This zone stopped the selling at $33.64 on Monday.

The minor range is $41.90 to $33.64. Its 50% level at $37.77 was the first upside target. Today’s buying has been strong enough to overcome this level, making it temporary support.

Daily Swing Chart Technical Forecast

Based on the early price action, the direction of the December WTI crude oil market into the close is likely to be determined by trader reaction to the minor 50% level at $37.77.

Bullish Scenario

A sustained move over $37.77 will indicate the presence of buyers. If this creates enough upside momentum then look for the rally to possibly extend into the minor top at $39.83.

Bearish Scenario

A sustained move under $37.77 will signal the presence of sellers. This could trigger a break into around $35.97, followed by $34.82 and a support cluster at $33.64 – $33.53.