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Important: I use New York close charts so that each 24-hour period closes at 5 pm EST.
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On October 7th I included U.S. crude oil in my weekly commentary for the first time. The market had just retested ascending channel resistance below 77.00 and looked ready to roll over.
Not only had sellers carved a bearish rejection candle on the weekly time frame, but the price action since February suggested that buyers were tiring.
Here’s what I wrote on October 7th:
If you’re considering buying (U.S.) crude oil, you may want to have a look at the two charts below first.
There’s no question the market is in an extended uptrend. At the start of 2016, oil was trading just below 28.00. Here we are less than two years later at 74.00.
However, every uptrend has pullbacks, and crude oil is no different. And judging by the weekly chart, I’d say the market is due for one.
At the time of that writing, oil was trading at 74.20. A few days later I alerted Daily Price Action members to a possible selling opportunity just above the 73.00 handle with a target of channel support between 66.00 and 67.00.
Fast forward to this week, and you can see the market has reached our target. And it didn’t take long either. In just eleven trading days, U.S. oil plummeted from 74.20 to a session low of 65.75 this past Tuesday.
That selling pressure has done more damage than you may realize. A look at the monthly time frame shows a massive bearish engulfing candle at a multi-year swing high.
Add the signal above to the bearish structure on the daily time frame, and you have an environment that suggests more pain ahead.
That said, the 66.00/30 area is still supporting prices as I type this. And with the daily mean (10 and 20 EMAs) up around 69.00, I’d say we have a few more days of consolidation before the next leg lower materializes.
Whether buyers can force a relief rally next week is anyone’s guess. But as a first step, they will need to manage a daily close (New York 5 pm EST) above 67.20 resistance, a level I pointed out last Sunday.
Sellers, on the other hand, need to break channel support at 66.00/30 on a daily closing basis. Doing so would open up downside targets including 63.90 and perhaps even 60.00 over the coming weeks.
In summary, my bearish outlook will remain intact even if buyers take out 67.20 resistance. Everything from the daily to the monthly time frame points lower, but sellers will need to clear 66.00/30 support in order to attract a fresh round of offers next week.
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