I have been bearish on crude oil futures for the past two weeks, after it made a double top over $73. As I said earlier (read here and here) this year’s pattern appears similar to last year, when it peaked on July 11th then sold off for the second half of the year.
Last week’s selloff gained momentum as it broke Fibonacci retracement resistance at 62.23. Friday saw a test of trendline support around 5950; it ended with the narrowest trading range of the previous four sessions; giving a breakout setup for today. Today we’re seeing some weakness in crude. Momentum had move up to the zero line, giving a bearish tilt for today.
The line in the sand for crude oil is the 58.62 level basis the August contract. It is a 50% retracement of the year’s rally (2/19 to 6/11). Note that this level served as resistance in March and April; the rally over it in May led to the rally to the 2009 high.
In the short run, this support may hold. As this support fails, however, look for the down trend to reassert itself. How low it goes this year is a question to be answered later.
Testing important support
