Crude Oil Price Update – Taking Out $55.15 Could Lead to Steep Sell-off
February West Texas Intermediate crude oil futures are under pressure on Thursday after the International Energy Agency (IEA) increased its forecast for U.S. oil output growth in 2018, raising the prospect of excess supply.
The Paris-based IEA said U.S. crude output next year would climb by 870,000 barrels per day (bpd), up from its November forecast of 790,000 bpd.
This news may drive the hedge funds to liquidate some of their massive holdings of WTI futures contracts.
Daily Technical Analysis
The main trend is down according to the daily swing chart. A trade though $55.88 will signal a resumption of the downtrend. This could drop prices to $55.15.
The three main tops at $58.60, $58.90 and $58.99 are a wall of solid resistance.
The short-term range is $55.15 to $58.99. The market is trading on the weak side of its retracement zone at $57.07 to $56.62, helping to give it a downside bias.
The main range is $49.92 to $58.99. If the selling pressure continues, we could see an eventual break into its retracement zone at $54.46 to $53.38.
Daily Technical Forecast
Based on the early price action, the direction of the WTI crude oil market today is likely to be determined by trader reaction to the short-term Fibonacci level at $56.62.
A sustained move under $56.62 will signal the presence of sellers. This could drive the market into a support cluster formed by the main bottom at $55.88 and the uptrending Gann angle at $55.80. We could see a technical bounce on the first test of this area, but if it fails then look for an acceleration into $55.15, followed by $54.46.
Overcoming $56.62 will indicate the return of buyers. This may lead to a test of $57.07.
The news is bearish so we’re essentially looking for the place on the chart that will trigger a massive hedge fund liquidation. Once one starts selling, the herd will follow, sending prices sharply lower over the near-term.
This article was originally posted on FX Empire
