Hello traders! On the July 21, the USOIL has reached $42.10 high, which was the highers price since May 9, when the price of WTI has been dropping like a rock.
During past several months, the price of USOIL has recovered by 279%, while it moved from $11.10 to $42.10. However, since prie tested the top, the price has started the downside correction and broke below the two key support areas formed previously. The first was $40.50 and the second $40.20.
This downside breakout has occurred under the heavy selling volume, showing a strong pressure from the bears. Today USOIL is trading near the previous support, which is now a resistance at $40.20. This price currently is a very strong supply zone, considering that WTI has sliced though both support levels without lifting a finger.
The medium-term trend remains very bearish and is likely to continue. I’ve applied multiple Fibonacci retracement indicators to upside corrective waves after USOIL topped out. There are 3 retracement levels that meet together at $36.80, which could be the potential downside target of a currently ongoing downtrend. This level is also confirmed by the previously formed heavy trading volume, right at the $36.80. Perhaps the $37.00 could be a strong psychological support to watch because this price area could be of great interest to buyers.
On the upside, the key resistance is seen at $40.50, and if there will be daily close above this level, the bearish scenario will become much less attractive. In this case, the price will either continue to consolidate or will rise towards the previous high at $42.00 area.
Bias: Strongly bearish while below $40.50
Potential Resistance Zone: $40.00 – $40.20
Potential Targets: $36.91, $36.77
Have a profitable trading!