USOil price weakness might extend further

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Updated: 25 September 2020

Hello traders! The USOil topped out on August 26, when the price tested 43.51 high. Then the price went down sharply, breaking below the ascending channel. It has reached 36.00 psychological support and rejected it cleanly. The following move was the pull back up, towards the 40.00 resistance area. The channel breakout point acted as the resistance, which has been respected throughout this week.

The most recent price action shows, that the 61.8% Fibonacci retracement level at 40.52 was rejected, which might imply that USOil will go though another drop in price.

Fibonacci was applied to the upside move, from the point where price rejected 200 Simple and Exponential Moving Average back on June 12. It can be seen taht the 61.8% Fibonacci retracement level at 36.33 is an important supply/demand area, which previously acted as the resistance as well as support. This level is also confirmed by 327.2% Fibs applied to the corrective move up after breaking the ascending channel.

The key resistance could be the 78.6% Fibs at 41.84 and as long as daily closing prices remain below this level, selling pressure will be only increasing. This should result in the price dropping towards the 36.33 – 36.00 support area within a short period of time. The major move is expected to take place only next week, nevertheless, the price can start dropping from today.

Bias: Strongly bearish while below 41.84

Potential Resistance Zone: 40.00 – 40.50

Potential Targets: 36.33, 36.00

Have a profitable trading!