Bidders Challenge WTI Downtrend

The bumrush south in WTI crude oil has momentarily paused. Bidders have stepped in with vigor over the past 36 hours, sending July WTI futures north of $53.00. At this point (11:30 AM EST), it appears as though price may test a key Fibonacci resistance level by the closing bell.

This week’s API and EIA inventories statistics brought a shift to stocks on hand, going from modest draws to major builds. The result was a falling market and a proximity test of $50.50. As a result of the inventories action, there will be an added emphasis on today’s Baker-Hughes Rig Count. Last week showed a drop in North American rigs to 800; given the slump in crude oil, be on the lookout for this figure to decrease further this week.

July WTI Futures To Challenge Daily Downtrend?

During the U.S. overnight session, July WTI crude oil futures fell just short of $54.00, posting an intraday high of $53.83. Since then, prices have retreated toward the $53.25 quarter-handle.

Here are the key levels to watch for the remainder of the session:

• Resistance(1): 38% Current Wave Retracement, $54.08
• Support(1): Spike Low, $50.60

Bottom Line: In the event we see a late-day rally, I will be looking to scalp July WTI to the short from $54.03. With an initial stop at $54.12, this trade produces a fast 8 ticks on a rejection of the $54.00 handle.

$54.00 is a make-or-break level for July WTI crude oil. If energy bulls fail to drive the market above this area, then WTI will very likely trade beneath $50.00 by the end of June.