Crude Futures Open Below a Major Fibonacci Level

Crude's price movements have been showing signs of bearishness the past several weeks. Check out the link below for more info on my bearish thesis.

With all of the geopolitical conflicts taking place around the world it can be difficult to be bearish on oil. Personaly, I was bullish on crude even after the Major selloff that started off the month of October. But as more time passes the charts are looking more and more technically bearish? Lets look at the technicals to see what I am talking about.

You can see in the chart below how the price of crude has broken down below support of this very tight price range on the 1-hour candles. This is a short-term bearish development. The dip in price coincides with a drop below a longer-term Fibonacci level. This is a longer-term bearish development. The price action has even printed lower lows which could potentially indicate more downside in the near future. If the price remains below this Fib level then I believe that a continuation to the downside is imminent.

I should mention that this tight consolidaton pattern is occuring near major technical levels. This shows you the bulls and the bears battling it out to gain controll of price direction near this major inflection point or support zone. You will see this battle often at major technical levels as traders try to short the breakdown or go long on the rebound.

In my previous post I mentiond the sloping head and sholders pattern that you can see below. This is a potential bearish development if it were to recieve confirmation. If the price of crude dips any lower then it could lead to a confirmation of this bearish candlestick pattern followd by more supstantial selling.

Traditionally, when a head and shoulders pattern is confirmed then the price will drop below the neck line at a distance equal to space between the tip of the head to the neck line. That would constitute a roughly 15% drop in this case. Of course not all head and shoulders follow the textbook rules, but it is always something to keep in the back of your mind.

In the chart I have also highlighted the areas where the major fib level has acted as support and resistance in the past. This shows you the validity of the imaginary trend line.

There are likely a concentrated amount of buyers and sellers holding at these pivot points which typically causes a significant price reaction when the price reaches these areas. Similar to the very tight consolidation price range that I mentioned.

There is one major variable that is keeping me from flipping completely bearish based on the trend reversal. The fact that there are a lot of major geopolitical conflicts taking place keeps me from falling completely into the bear camp.

One fact that I want to point out that might contribute to the bear camp is that the previous rally in oil prices that followed the start of the Isreali-Hammas conflict has almost been completely erased. If the price continues to move lower, then it might indicate that investors are not worried about the conflict affecting the oil supply.

Right now, I am conflicted between bullish and bearishness. I have highlighted the major local support levels to watch for potential rebounds in price action. These price points are 80.75, 79.00, and 77.50.

If the price dips below 80.75, then lower lows will be printed in the short-term picture, leading to increased bearishness. If the price dips below 77.50, then there will be lower lows on the long-term picture, which would confirm the end of the rally oil has experienced throughout most of this year.

Conclusion

The only things I can think of that might be causing the recent selloff in oil are recession fears or a major profit take type of correction. If these two factors were out of the picture, then I would believe that oil would have more upside or at least remain at these high levels.

One other factor that will affect oil and equities alike is the fact that inflation seems to be slowing. If this trend continues, then it will equate to slower growth in the economy. This leads to less revenue for public companies and less demand for oil. This idea is likely in the mind of oil traders.

If oil gets below 80$ then I will be cautiously looking for short setups for swing trade opportunities.

As always, I am not a financial professional, and this is not investment advice. Be careful and be patient. Dont anticipate the market. Rather, participate in the market. Give some of your investments time and know when to cut your losses. Don't be greedy. Don't invest in anything you don't understand. Don't put all of your eggs in one basket. Don't listen to the hype. Don't fomo or panic into or out of trades. Do your own due diligence. And just follow the trends. A trend is your friend. Good luck trading