After two weeks of consolidation, March crude oil futures surged to the upside, changing the main trend to up on the daily chart, but making a little more than a normal retracement on the weekly chart.
The market will be analyzed by looking at a longer-term range and a short-term range. The long-term range is $104.37 to $91.47. This range forms a retracement zone at $97.92 to $98.44. On January 23, the market closed in a position to test this range. Since the main trend is down on the weekly chart, fresh shorting pressure may re-emerge inside this zone. This will be an attempt to defend the top at $100.79 which is the change in trend level. So far this price action has been normal when compared to previous rallies.
Given that the definition of a downtrend is a series of lower tops and lower bottoms, crude oil will have to break this pattern by taking out a lower top before we can say the trend has changed to up. Even if the trend turns higher, there may not be an immediate rally since the $100 level is considered good resistance. This means the market is likely to go into a sideways mode until a new higher bottom can be formed.
The short-term range is $100.79 to $91.47. On January 23, crude oil closed on the strong side of the retracement zone at $96.13 to $97.23. Holding this area is important because it could provide the support to launch the market into higher price levels. A failure to establish support in this area will mean that strong short-covering…