Crude Oil Price Forecast: Drops to New Low, Key Support Levels Eyed

Crude oil fell to a new retracement low of $72.77 on Thursday before an intraday rebound. The decline triggered a breakdown of a rising trendline and a drop below the interim swing high from early November at 73.27. This shows continued short-term weakness and indicates that lower prices may be tested before the bearish correction may be complete. Certainly, it is getting closer to a sustainable low.

Bear Trend Continuation

Although a drop below the trendline is short-term bearish (short line), the next potential support zone is a little lower around 72.32. That price level will complete a 61.8% Fibonacci retracement, and it is confirmed by the 50-Day MA, which converged with the line as of today. Moreover, the 20-Week MA (not shown) shows a price of 72.03, very close to the next lower price range.

When two indicators point to a similar price support level it can tend to have a greater chance of being tested as support, particularly if the one support level just above it fails to hold as support. That is what happened today. If the 50-Day line fails as support, then the next lower target looks to be the 78.6% retracement at 70.03.

January Shows Weakness

Since January is about to end, the one-month chart (not shown) should be considered once the month ends, on Friday. Today, the monthly pattern is bearish. It shows a large topping tail and a narrow open to close range at the bottom of the month’s trading range. Unless there is a strong advance on Friday, it will likely end the month in the lower third of the month’s price range.

Given the price range to date, the lower third of the range starts at 74.21, and below. Although the month may end with a bearish monthly candle, it is not valid until triggered. That would happen on a drop below the month’s low, which is currently at 72.03. Nonetheless, if support for the retracement is found above the January low, and it leads to bullish reversal, the month’s range provides plenty of room for a strong rally.

Bullish Reversal Heads Up into Resistance Zone

Nonetheless, a bullish reversal would be rising into a potential consolidation zone, even if only considering trendlines and moving average lines. The 200-Day MA is at 75.10 and the 20-Day MA is at 76.02. Also, there are two weekly resistance levels to consider. This week’s high is at 76.03 and the prior week’s high was 78.82.

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