Here’s our analysis of the West Texas Intermediate Crude Oil Continuous Contract (WTIC) weekly chart.
A large inverse head and shoulders base began forming in late 2015 and was completed in November 2016. The neckline was situated in the $51 area and that pattern resistance was broken at the end of 2016.
The breakout failed and the price of crude oil slid back down. In July 2017 it retested right shoulder support at $42. It was a successful test which initiated the start of a 15 month uptrend. That move ended last month and completed the targeted measured move of the inverse head and shoulders pattern.
Crude oil prices have since collapsed, falling 30% from their $76.90 October high to Tuesday’s $53.43 close. The drop broke through several key technical support levels.
An uptrend line drawn off the 2016 and 2017 lows currently intersecting the $57 area and horizontal support going back to the early 2017 highs formed a key zone of support. This triangle of technical support was broken in Tuesday’s session (reminder: this is a weekly chart and the last candle is not fully matured). There is something of a support vacuum below this area.
The next major level of horizontal support is not until the $42 level. This level was the bottom of the inverse head and shoulders right shoulder and the area that acted as the 2017 low. There are minor support levels at $50 and $46.55 which should slow down the rate of any further decline or potentially contain a greater loss.