Oil Price Forecast: WTI Crude Plunge Targets Last Line of Defense

Crude Oil Technical Forecast: WTI Weekly Trade Levels

• Oil prices plunge nearly 10.7% off yearly high- largest weekly range / decline since late-January
• Crude bulls searching support at December uptrend- risk for downside exhaustion in the days ahead
• WTI Resistance 79.75-80.31, 81.52, 84.57-85.33- Support 77.66-78.55, 75.31, 73.00/74

Oil prices plunged more than 6% this week with WTI poised to mark a six-day decline ahead of the New York close on Friday. Crude is now testing the yearly moving average with more significant technical support eyed just lower and the focus is on possible downside exhaustion in the days ahead. The battle lines are drawn for the WTI bulls as price approaches yearly trend support. 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 last month’s Oil Price Forecast we noted that the, “oil price rally has exhausted into uptrend resistance and the risk remains for a deeper correction within yearly advance.” Crude prices have plunged nearly 10.7% off those highs with the decline now approaching the last line of defense for the bulls at 77.66-78.55- a region defined by the 100% extension of the April decline, the 50% retracement of the December rally and the 52-week moving average. Note that basic trendline support also converges on this threshold over the next week- looking for a reaction into this zone in the days ahead IF reached.

Oil Price Chart – WTI Daily

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

A closer look at WTI price action shows oil trading within the confines of a multi-week descending channel formation extending off the yearly highs with the lower parallel further highlighting upcoming support around 77.66. A break / weekly close below this threshold would suggest a larger reversal is underway here with subsequent support objectives eyed at the 61.8% Fibonacci retracement at 75.31 and the 2024 low-day close / low-week close at 73.00/85- both areas of interest for possible downside exhaustion / price inflection IF reached.

Initial resistance is eyed at the 79.75-80.31 pivot zone and is backed closely by the objective monthly open at 81.52. Ultimately, a topside breach / close above channel resistance would be needed to suggest a more significant low is in place. The next major resistance objective is eyed at 84.57-85.33 in the event of a breakout.

Bottom line: 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. Keep in mind we are in the early throws of the May opening-range – watch the weekly closes and look to the breakout for guidance here.  

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

Follow Michael on X @MBForex