Commodity Bottom Line: Yesterday’s daily close below the major ascending channel base at 128.14 favours additional losses for crude oil. This scenario highlights support levels at 124.09, 121.61 and 116.87 as the current correction matures. A close above 144.51 is now required in order to generate new upward price momentum.
Crude oil prices pierced the base of a rising wedge pattern at 135.13 on July 16. The resulting bearish trend reversal produced a sharp acceleration lower in prices as the daily studies attempted to resolve a bearish divergence that developed from overbought valuation levels.
Prices have now just pierced a major ascending channel base at 128.14.
The daily close below this level should prolong the current retracement phase and highlight 38.2% Fibonacci retracement of the 2008 rally at 124.09 (hit this morning), followed by a double bottom near 121.61 from the May-June time period.
Should this key support give way, the 50% Fibonacci retracement level at 116.87 will come in to focus, followed by 61.8% retracement at 109.65.
Crude has not had a meaningful price retracement since March, so the close below 128.14 is telling as it has generated a bearish medium-term trend reversal.
Prices will have to register a daily close above resistance at 132.07 in order to arrest the current decline.
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