Crude Oil Price Meets Key Resistance / Commodities / Crude Oil

Crude oil moved above the previous highs and at the moment of writingthese words, it’s testing the upper border of the March price gap. And giventhe fundamental news that are reaching (and likely to reach) the market – the increasingCovid-19 cases in the U.S. and globally – it seems that black gold might nothave enough strength to keep pushing higher.

The upper border of the March price gap is one of the most important resistancelevels nearby. There’s also the 61.8% Fibonacciretracement level, but since it’s based on the April low that isrelatively unclear (different series of futures contracts were trading at verydifferent price levels, some were even in the negative territory), theFibonacci retracement might not be as reliable as the price gap.

This means that the resistance level that is being tested right now, isof critical importance. Please note how aligned is the price of crude oil withthe previous spending chart – and with the prices of stocks themselves.

Just several months ago, crude oil was one of the weakest markets outthere, and its rebound was one of the strongest. The reversal in black goldand a decisive decline could be the thing that tips the scale for all markets.

Consequently, while a trigger is not necessary for the market to movein a given direction, getting one could speed things up. And it seems thatcrude oil’s reversal could be the trigger, along with a comeback of the USDIndex.

When based on the daily closing prices, the resistance created by theupper border of the March price gap is at $41.28, and at the moment of writingthese words, crude oil istrading 14 cents above this level. This by no means implies that theresistance is broken. If we see a daily close above $41.28, it could havebullish implications, but it doesn’t have them right now.

“Could”, because if we look at crude oil’s 4-hour chart, we’ll get aslightly different picture.

In this case, the upper border of the huge March price gap is at$41.61, which means that crude oil is actually slightly below it, not above it.The intraday high (so far) was $41.55, which means that this resistance was nottouched on an intraday basis.

The first chart shows the new daily global cases and the second chartshows the new daily U.S. coronavirus cases. While it’s been obvious that the cases are in a steady uptrend globally,the upsurge in the U.S. cases and the second wave of the virus is a relativelynew development and it’s not yet widely covered by the mass media. It’s nothidden, but it’s not being emphasized as much smaller numbers were emphasizedin March. But it’s going to change once the new daily cases move to new highsas that’s a highly catchy topic and people won’t be able to ignore it.

Will crude oil be able to continue to show strength and rally further,even though it plunged on similar news in March? We view the former asunlikely.

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Nadia Simmons
Forex & Oil Trading Strategist
PrzemyslawRadomski
Founder, Editor-in-chief

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