Crude Oil has been trending lower for months, ever since price topped out at around $115 at the beginning of May. Crude is now sitting just below an important fulcrum that could pave the way for a major move ahead. Here’s why..
Three-Way Resistance
The daily chart shows Crude is facing tough, three-way resistance in the form of quarterly VWAP, an upper trend line, and visual resistance – all of which culminate at the $90.50 level.
Visual resistance at $90.50 was formerly support in June, until a violation occurred in August. The retest at this level is very important, and a failure could lead to major selling pressure ahead.
In addition, the fact that $90.50 also coincides with quarterly VWAP and an upper trend line indicates we could see significant selling pressure back toward the August low of $75.70.
As you many know, professionals will look to sell at a premium when price returns to test VWAP in a downtrending market.
Rising Pennant
The daily chart also shows a rising pennant formation (or flag) that has developed over the last six weeks. This type of pattern also forecasts selling pressure ahead. However, a clear violation of the lower boundary of the pattern must be seen for clear confirmation.
While Crude certainly seems extremely bearish at this point, continue to watch $90.50 very closely ahead. There’s been a significant battle at this zone the last three weeks, which means the bulls aren’t going away without a fight.
If the bulls get price over $90.50, we could be surprised by an influx of buying pressure. Remember, buying begets buying.
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Let’s see how Crude plays out!
Cheers!
Frank Ochoa
PivotBoss.com
Follow Frank on Twitter: http://twitter.com/PivotBoss
