It’s been an up and down week for crude oil futures with the price action playing out as expected. Going into the new year, we were looking for a choppy, two-sided traded largely because of the uncertainty regarding compliance with the OPEC/Non-OPEC plan to cut production, trim supply and return price stability to the market.
On the upside, we expected prices to be capped by rising U.S. production, while on the downside, prices were expected to be supported by reports that countries who had agreed to limit production would announce compliance with the plan. Based the price action this week, we can conclude that we’ve seen a little of both.
Weekly West Texas Intermediate Crude Oil
The main trend is up according to the weekly swing chart. However, momentum has been sideways for the last four weeks. A trade through $56.24 will signal a resumption of the uptrend. A trade through $44.49 will change the trend to down.
Given the average weekly range, it’s pretty safe to say the uptrend is safe next week.
The major 50% to 61.8% retracement zone is $50.69 to $54.25. The market is currently straddling this zone and to be specifically, it is straddling the Fibonacci level at $54.25.
Based on the price action since December 16, the direction of March Crude Oil next week will be determined by trader reaction to the Fib level at $54.25.
(Click to enlarge)
A sustained move under $54.25…