September WTI crude oil futures are attempting to close the week on a strong note, but are down modestly on the day. Prices have consolidated near $42.00 as bidders evaluate the prospects of long-term oil valuations. One thing is for sure ― September WTI has filled in the weekly GAP area from last March.

Although the technical outlook for WTI is fairly positive, the U.S. shale industry continues to take it on the chin. Earlier, the Baker-Hughes Rig Count posted another all-time low, 172 rigs. This represents a four rig week-over-week drop, extending yearly losses. So, when will American drillers resume operations? According to David Haynes, honcho of private equities firm Natural Gas Partners, “we will be drilling wells again when oil is back in the $50 range.” 

For now, it’s anyone’s guess when WTI crude oil will return to $50.00 per barrel. However, things are much better than in April and the weekly intermediate-term bullish trend is intact. 

WTI Crude Oil Fills In GAP Area, Stalls Near $42.00

Eventually, all GAPs in pricing are filled. That is now the case for September WTI futures; prices have returned to the early-March GAP area.

Going into next week’s action, there are two levels worth watching in WTI:

• Resistance(1): 62% Fibonacci Retracement, $46.37
• Support(1): Bollinger MP, $39.71

Bottom Line: Given the current crude oil market fundamentals, I expect WTI to test topside resistance at $46.37 by Labor Day. The rally will be driven by economic optimism and a weakened USD. Upon September WTI crude oil reaching this threshold, a selling opportunity will come into play.

Until elected, I’ll have sell orders in the queue from $46.09. With an initial stop loss at $47.29, this position trade yields 240 ticks on a 1:2 risk vs reward ratio.