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WTI Crude Oil Rallies, Tests Fibonacci Resistance

Posted Thursday, June 7, 2018 by
Shain Vernier • 2 min read

As we roll toward the closing bell, WTI crude oil is up more than 75 cents for the session. Volumes have not been as heavy as we are used to seeing, but July WTI futures are on pace to exceed 600,000 traded contracts today. Dilution of volume between the July/August contracts is beginning to creep into the equation but remains at a solid 4/1.

Supply And Demand

After quickly glancing over the mainstream financial news feed, a majority of the reporting is bullish crude oil. That is an interesting take and one that I personally do not subscribe to. Most of the supply-side fundamentals point to a spike in production due to begin hitting the markets in coming weeks. The pressure is likely to jeopardize OPEC production cuts and force even more supply onto the market. These items will be largely detrimental to WTI pricing.

Of course, the U.S. equities markets are trending higher. In addition, the FED is due to resume its stated policy of “gradual tightening” next week. Perhaps a stronger dollar and increased demand will offset a global supply glut.

For now, we will just have to wait and see how the market fundamentals pan out.

WTI Crude Oil Technicals

If you are an Elliott Wave fan, then the daily chart for July WTI crude futures is a thing of beauty. A bearish trend, moderate retracements, and a clearly-defined wave count are all evident.

July WTI Crude Oil Futures (CL), Daily Chart
July WTI Crude Oil Futures (CL), Daily Chart

For most of the week, the $65.00 handle has been the catalyst for heavy two-way action. Today’s session has brought a test of resistance at the 38% retracement of the current wave ($65.92). Here are the levels to watch for the rest of the week:

  • Resistance(1): 38% Current Wave Retracement, $65.92
  • Support(1): Psyche Level, $65.00
  • Support(2): 78% Macro Retracement, $64.19

Overview: The area between $64.19 and $65.92 will determine if the current bearish trend remains valid. If price breaks above $65.92, then we may be in for a grind north toward $70.00. If not, this market has the potential to fall apart under $64.19 and test the $60.00 area.

Given the coming U.S./North Korea summit and the late-June OPEC meeting, fundamentals will be hard at work in this market. Opportunity will certainly be afoot, so stay tuned to FX Leaders for insights and analysis on how to attack global oil.

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