December Crude Oil finished flat for the week after posting a potentially bullish closing price reversal bottom last week. Traders failed to confirm the chart pattern because of the indecision created by the government shutdown.
While the shutdown has been bearish for the dollar, it hasn’t created a bullish tone in the market. This may be because of the concern that a prolonged shutdown would mean lower demand for crude oil since it is expected to slow economic growth. In addition to the shutdown, investors are also worried about the potential impact on demand by a government default. As the week-ended, however, prices stabilized as investors became more optimistic of an end to the shutdown and the raising of the debt ceiling.
Technically, the closing price reversal bottom the week-ended October 4 has stabilized crude oil prices. This is a potentially bullish chart pattern, but the key to its success is the confirmation. If the chart pattern is confirmed, short-covering should take it back to at least $105.17 to $106.24. If the market is going to turn down again, it is likely to start inside this retracement zone.
Support comes in this week at $100.64 and the 50% level at $100.38. A sustained move through this price will likely lead to a break into the 61.8% or Fibonacci level at $98.17.
Additional support could be provided up an uptrending Gann angle at $98.52.
On the upside, the first sign of strength will be overcoming a downtrending…