Three weeks ago, the seasonal switch in the crude complex took place. And it’s been rally on ever since. But now, that rally is losing steam. Here’s the technical picture for why:
On the continuous chart, the 38.49 level marked /cl’s 50% retracement from its prior swing high on the daily and weekly charts up at 50.92 (you do remember when oil was priced in the 50s, correct?). This level also coincides with a few key prior structure areas on the daily chart (August 24, 2015 low, Dec. 24, 2015 high, Jan. 4, 2016 high).
Above the 50% retracement, we find a VERY interesting zone of confluence between $40.24 and 43.25. Here’s why:
1. That zone begins with a 1.618% fibonacci inversion from the low of the year (26.05), to its prior swing high (34.82).
2. The zone includes a 61.8% retracement of the prior swing down impulse leg 50.92-26.05.
3. The top of that zone (43.25) touches multiple prior structure levels going back more than one year
So should the 50% retrace fail, or if we see a small pullback and bounce, I’d be watching that 40.24-43.25 zone for bears to come back in and roar loudly.