Now that June Crude Oil futures have cleared more than a few hurdles on the daily and weekly charts, it’s time to take a look at where it stands on the weekly chart to get an idea of its strength and to identify potential resistance areas.
(Click to enlarge)
According to the monthly swing chart, the main trend is still down. However, the three month rally indicates that momentum has shifted to the upside.
The main range is $65.93 to $30.79. Its retracement zone at $48.36 to $52.51 is the primary upside target. A long-term downtrending angle passes through this zone in April at $50.59 and in May at $48.59, making it a valid upside target also.
Since the main trend is down, we expect to see sellers show up on a test of $48.36 to $52.51. The selling could come from new shorts or established longs booking profits.
Bearish traders are going to try to produce a new lower top inside this zone. This is not necessarily a bad thing because in my opinion, the market needs to make one more correction and form a higher bottom in order to solidify its support base.
Buyers are going to try to drive the market through this zone, but this is likely to be triggered by aggressive short-covering rather than new positions. I don’t believe that professionals are going to chase this market higher given the fragile supply/demand situation.
If there is a spike move through $52.51, for example, it will probably set up a great shorting…