FREE Guide - 5 Chart Patterns You Need to Know!

Oil Slides Below Support

On October 27 oil (CL) made a false breakout below support at $44.31, the low throughout September. Following the false breakout it rallied to a November 3 high of $48.36. Since that high the price has once again fallen below support, and the October 27 low at $42.58.

The recent move lower indicates momentum has shifted back to the downside on the shorter time frames, in alignment with the longer-term downtrend.

The next test for oil is the $39.22 low from August 24.

Figure 1. December Light Sweet Crude (CL) - Daily Chart

The expectation is that oil will continue to decline toward $39.22. That region is anticipated support, although a downside breakout could occur given the short-term and longer-term selling momentum and downtrend. If the price does break lower, $38 to $37.5 is the next expected support/target zone.

A rally back above $44.5 warns of another false downside breakout. It isn't necessarily a buying opportunity but could indicate a short-term rally into resistance near $48 and/or $50. A rally beyond those higher resistance levels isn't an immediate concern at the moment, but indicates a further rally into the $58 region.

Get This FREE Technical Analysis Guide!
Timing is everything, and with this guide, you'll learn how technical analysis can help find the right time to enter and exit your futures trades. Nearly 30 explanations and examples of the most popular technical analysis tools are all in this one handy guide. It's like having a futures trading mentor at your side!