February crude oil futures continued the rally it began several weeks ago at $92.10. Based on the break from $106.22 to $92.10, the market has already retraced more than 50% of this range. The retracement zone target at $99.16 to $100.82 could slow down the rate of ascent, but so far it doesn’t look like the move is attracting fresh shorting pressure despite the downtrend on the weekly chart.
The main trend will change to up on a trade through $102.52. A trade through $92.10 will reaffirm the downtrend. Because of this, one has to assume that the current move is still being driven by short-covering rather than fresh buying. How the market reacts inside this zone will determine the strength of the trend over the near-term.
Last week, the market broke through a downtrending Gann angle from the $106.22 top, moving .50 per week. This week, the market confirmed the move when it held above the angle, currently at $97.72.
Besides the move to the strong side of the downtrending angle and the 50% level, the market is currently in a position to test an angle moving up $2.00 per week. This angle is at $100.10 this week and $102.10 next week. Overtaking this angle will mean that upside momentum is increasing.
A failure to overcome the angle as well as the retracement zone will mean that upside momentum is slowing and that the market is getting ready to roll over to the downside. The nearest support angle is at $96.10 this week and $97.10 the next.…