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January crude oil rose to $90.76 early Tuesday, but failed to close over key resistance at $90.6. Prices fell to an $88.04 swing low by the end of the day and are poised to continue to at least $87.7 and likely $86.8.
The overall bias remains positive for the near term. The decline is likely corrective and should hold $86.8 and no lower than $85.7. A move above $89.7 early Wednesday, before the EIA stats are released, would indicate that another test of $90.6 is underway.
Retracements
The retracements from the major swing low of $80.28 to $90.76 show $86.8 as the 38% retracement and $85.7 as the 50% retracement. Both of these targets are also the 50% and 62% retracement from the more recent swing low of $82.78, respectively. Note that from a technical standpoint, the outlook doe not shift to neutral to negative for the near term until there is a sustained close below $84.4, the 62% retracement from $80.28
The $89.7 level is the 62% retracement of Tuesday’s decline from $90.76 to $88.04. A close over $89.7 would confirm that the move down was corrective and that the move higher will continue.
Intraday Moving Average Table
There is also immediate resistance at $88.9, which is confluent throughout the 5- and 21-period moving averages on the 30-, 240- and daily charts. The $85.7 target is the 21-day (monthly) moving average. A close below $85.7 would call for $84.4 and possibly lower.
Candlestick Review
The evening star setup on the daily candlesticks chart is another indication that the move down will likely continue on Wednesday. However, January failed to close below the midpoint of the pattern at $88.5 Tuesday, which may be an indication that the pattern will fail.
Review of Momentum Status
Intraday divergences and a PeakOut signal on the 72-cent KaseBar is another indication that the move down will likely continue early tomorrow before the EIA stats are released.
To summarize, the move down is corrective and is expected to continue to at least $87.7 and likely $86.8, but prices have potential to fall to $85.7 and even $84.3 before the move up continues. Support at $86.8 and no lower than $85.7 is expected to hold. Should $89.7 be overcome before the EIA stats are released, then look for another test of $90.6, a sustained close above which would call for a move into the mid $90s in the medium term.
Kase Comments has been provided to you by Kase and Company, Inc. CTA. Written by Dean Rogers AP and edited by Cynthia Kase, CMT, MFTA. See www.kaseco.com or contact Dean Rogers at 505-237-1600 for further information or a free trial of Kase’s weekly technical forecast. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of Kase and Company, Inc. Kase and Company, Inc. work products including, but not limited to, reports, comments, forecasts, analysis, and screenshots whether oral or written are “publications” and are not to be construed in any way as “consulting”. Screenshots created with TradeStation. ©TradeStation Technologies, Inc. All rights reserved.
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