TECHNICAL ANALYSIS
Crude oil futures (DEC22) spiked higher today on the heels of Thursday’s bullish reversal and the daily now looks like a potential bear trap as Wednesday/Thursday’s trade took out both the August and July lows and carried DEC22 futures to the March lows.
DEC22 Crude Oil Daily
DEC22 futures have dipped into an intermediate-term level of support against the 8173/7884 area, which represents basically a 38.2% correction of the entire contract move from 2020 lows to the top this year at 11078. Volume and open interest have continued to decline throughout the entire year, the daily is reaching oversold conditions on the oscillators and looks like a potential bear trap has been set with the latest breakdown.
The hourly chart is now reaching overbought conditions with the spike rally on Friday. DEC22 should see strong resistance against the 8623/8680 level, key resistance is 8801 and pivotal short-term resistance is 8979/9000. Closes over 9000 setup a test of 9200 with potential to retest the 9555 swing highs.
Longer-term, the weekly is reaching some oversold conditions—again, with declining volume and open interest throughout all of 2022. Depending on where prices settle on 09/09/2022, the market is very close to a small bullish reversal on the weekly chart. As long as spot prices remain under the 9020 level, they remain on the defensive. If the bear trap fails and the market regains downside momentum, then spot prices should minimally be heading back to the 7100/6600 level (based simply on the breakout of two months of sideways trade to the right of the spike top).
With this week’s lows, a case could be made for a head and shoulders pattern developing. In this scenario, spot crude could be expected to trade back toward the $50 level eventually. Support for the DEC22 is critical now at 8050 and 7940 with the 7884 area as a last gasp support point. Closes under 7940/7884 should open counts to 7276/7212. The 7200 level represents some strong long-term support for the DEC22 and closes below that suggest 6379/6360 with counts to 6020.
