August crude oil futures are set to finish the week lower after an earlier rally failed to draw enough long interest to drive the market away from the retracement zone that has been providing resistance for several weeks. A close below this area on Friday will set a bearish tone for next week. This could create enough downside momentum to trigger a break into the last main bottom at $56.88. A trade through this bottom will turn the main trend to down.
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The main range is $48.71 to $64.12. If the selling pressure is strong enough to take out $56.88 then look for a break into its retracement zone at $56.42 to $54.60. This area is a value zone so investors are likely to show up on a test of this zone.
A weekly close below $60.50 will give the market a downside bias. Any rally would likely be labored because investors would have to regain potential resistance levels at $60.50 and $61.35 and a minor high at $62.22 before there would be enough strength to mount a challenge of the main top at $64.12.
Earlier in the week, crude oil was underpinned by news of another drop in the rig count. According to Baker Hughes, the U.S. crude oil rig count fell by four, from 635 to 631, in the week-ended June 19. This marked 28 consecutive weeks of falling active rigs. Over that time period, the number of producing rigs has dropped from 944 to 631 and are now at their lowest level since August 2010.
Some bullish investors are concerned…