Oil Price Forecast: Crude Bears Wrestle with Key Support

Crude Oil Technical Forecast: WTI Weekly Trade Levels

• Oil prices plunge more than 12% off yearly high- testing technical support for a third week
• Crude marking divergence, unable to close week below support- bears may be vulnerable
• WTI Resistance 78.89, 79.92-80.31, 81.52- Support 77.49/66, 75.31, 73.00/74

Oil prices were off more than 2.6% this week with WTI trading at 77.80 ahead of the New York close on Friday. Crude has been trading within a 4.5% range since the initial May sell-off with multiple attempts to break support failing to mark a weekly close below. The battle lines are drawn heading into the close of the month with the bulls struggling to hold the last line of defense. These are the updated targets and invalidation levels that matter on the WTI weekly & daily technical charts heading into next week.

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Oil Price Chart – WTI Weekly

Chart Prepared by Michael Boutros, Technical Strategist; WTI on TradingView

Technical Outlook: In my last Oil Price Forecast we noted that the, “oil price correction is approaching key support objectives and we’re on the lookout for a possible exhaustion low in the days ahead. From a trading standpoint, losses should be limited to 77.66 for the yearly uptrend to remain viable with a breach / weekly close above the objective May open needed validate a breakout of the April downtrend.” Oil prices have been testing this support zone for the past three- weeks and while we’ve seen multiple daily closes, the weekly close continues to respect this support for now.

Oil Price Chart – WTI Daily

 Chart Prepared by Michael Boutros, Technical Strategist; WTI on TradingView

A closer look at WTI price action shows oil continuing to trade within the confines of a multi-week descending channel formation extending off the yearly highs with price turning sharply lower from confluent resistance last week at 79.92-80.31- a region defined by the 200-day moving average, the 38.2% retracement of the December rally, and the objective 2023 yearly open. Ultimately, a breach / close above this threshold would be needed to invalidate the April downtrend. Initial resistance now eyed at the 61.8% Fibonacci retracement at of the most recent decline at 78.89.

A weekly close below this key pivot zone at 77.49/66 would threaten resumption towards the 61.8% retracement of the October advance at 75.31 and key support into the yearly low-day close at 72.99- both levels of interest for possible downside exhaustion / price inflection IF reached.

Bottom line: Oil has been trying to break this key support zone for the last three weeks with the bears unable to secure a weekly close below. From a trading standpoint, the threat remains lower while within this channel with a close below 77.49 needed to mark resumption. That said, we’re on the lookout for evidence of an exhaustion low in the days ahead IF price is attempting to put in a more significant bottom here with a close above 80.31 needed to invalidate the multi-week downtrend. Stay nimble into the monthly cross and watch the weekly close here for guidance.

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--- Written by Michael Boutros, Sr Technical Strategist with FOREX.com

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