Crude Oil Price Update – Downside Momentum Targets $50.18 By End of Week
U.S. West Texas Intermediate crude oil futures closed sharply lower on Friday while posting its worst weekly loss since July as the coronavirus outbreak continued to pressure prices due to concerns over slowing global demand.
Traders are watching primarily the impact of the virus on China. A slowdown in China’s economy would impact demand because China is the world’s largest crude oil importer, after importing a record 10.12 million barrels per day in 2019, according to data from the General Administration of Customs. China is also the second-largest oil consumer, behind the United States.
On Friday, March WTI crude oil settled at $54.19, down $1.40 or -2.52%.
Daily Technical Analysis
The main trend is down according to the daily swing chart. The downtrend was reaffirmed on Friday when sellers took out a pair of former main bottoms at $54.85 ad $54.48. The next downside targets are main bottoms at $52.40 and $50.18.
The main trend will change to up on a move through $59.77. This is highly unlikely, however, given the strong downside momentum.
The main range is $50.18 to $65.40. Its retracement zone is $55.99 to $57.79. The market is currently trading on the weak side of this zone, making it resistance.
Short-Term Outlook
Conditions have worsened over the weekend so I have to conclude that prices will continue to weaken on Monday. A combination of long-liquidation and short-selling is driving prices lower so I don’t expect smart buyers to just step in front of the downside momentum. Prices are likely to continue to move sharply lower until the market hits a value area and this may not be until the lower $40’s.
As of Friday’s close, the market was walking down a Gann angle, moving at a pace of $1.00 per day from the $64.50 main top on January 8.
If it continues to move lower at this rate then look for a break into the uptrending Gann angle at $52.59 on either Monday or Tuesday.
The October 3, 2019 main bottom at $50.18 could be hit on January 30 or 31.
On the upside, the market would have to overcome $54.99 to give any indication the selling is slowing. Overtaking $55.99 could trigger a strong short-covering rally.
This article was originally posted on FX Empire
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