October Crude Oil
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October Crude Oil futures are in a position to finish the week higher after an impressive follow-through rally, following last week’s potentially bullish closing price reversal bottom chart pattern. Although the main trend is still down according to the weekly chart, the chart pattern indicates a shift in momentum to the upside.
If the rally continues then look for crude oil to test the first two objectives at $50.20 and $51.25. Since the trend is down, sellers are likely to come in following a test of this zone. If the buying is strong enough to continue the move, then the rally may extend into $53.14 to $54.43.
The first rally after a prolonged move down is usually short-covering. Buyers don’t usually come in until a support base is established. The initial rally was $37.75 to $49.33. Early last week, the market tested its retracement zone at $43.54 to $42.17. There was a strong technical bounce on a test of this zone, suggesting that aggressive buyers may have enough to support the market.
This is a good sign for bullish traders, however, the market may test the short-term retracement zone several times before a solid support base forms. In the meantime, crude oil may bounce between $43.54 and $50.20 while the bulls and the bears battle it out for control.
A failure to hold $42.17 will signal that sellers have regained control. In this case, buyers…