Crude Oil Price Update – Keep an Eye on Trader Reaction to $12.38 – Could Be Game Changer

U.S. West Texas Intermediate crude oil futures are trading sharply lower shortly after the regular session opening on signs that worldwide oil storage is filling rapidly, raising concerns that production cuts pledged by OPEC+ will not be fast enough to fully offset the demand destruction caused by the coronavirus pandemic.

At 12:51 GMT, June WTI crude oil is trading $12.93, down $4.01 or -23.73%.

Last week, the U.S. Energy Information Administration (EIA) reported that U.S. crude inventories stood at 518.6 million barrels during the week-ending April 17. This puts it within striking distance of the all-time record of 535 million barrels set in 2017.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through $6.50 will signal a resumption of the downtrend. The main trend will change to up on a move through $33.15. Given the bearish fundamentals, this is higher unlikely at this time.

Furthermore, the chart pattern suggests that traders will have to build an elongated support base before we can start to build any case for a bullish move.

The main range is $48.92 to $6.50. Its retracement zone at $27.71 to $32.72 is a major resistance zone.

The short-term range is $33.15 to $6.50. Its retracement zone at $19.83 to $22.97 is also resistance. Last Thursday, the market stopped just short of this retracement zone at $18.26.

The new minor range is $6.50 to $18.26. Its 50% level or pivot at $12.38 is the next downside target.

Daily Swing Chart Technical Forecast

Based on the early price action and the current price at $12.93, the direction of the June WTI crude oil market the rest of the session on Monday is likely to be determined by trader reaction to the pivot at $12.38.

Bearish Scenario

A sustained move under $12.38 will indicate the selling pressure is getting stronger. If this move can create enough downside momentum then look for a possible retest of last week’s low at $6.50.

Bullish Scenario

Holding $12.38 will indicate that the selling pressure is slowing and that aggressive counter-trend buyers could be coming in.

If this move is able to create enough upside momentum then look for an intraday rally into $15.36, followed by $18.26.

Side Notes

Watch the price action and read the order flow on a test of $12.38. This level is important because buyers may try to form a secondary higher bottom on a test of this price. If successful, this could spark the start of a short-covering rally.