Crude oil futures headed sharply lower in Tuesday's trading session, pulled down largely by stock market weakness. The sell-off completed a breakout from the Channel Up chart pattern illustrated here on the 240-minute time interval, and sets the market in motion for a possible prolonged downtrend.
The most recent breakout generated a sell signal when the nearby US Crude Oil futures fell through the channel support at $97.00 per barrel, generating the projected price forecast. The market immediately headed towards the target area, settling in the middle of the range of $92.77 and $95.06 per barrel. While this level serves to fulfill the forecast and conclude the pattern, it also leaves the market open for a continuation to the bottom end of the range. The strong momentum and high volatility encourages this as a possible outcome, with the length and size of the Channel Up chart pattern also suggesting this could be the beginning of a longer term decline to new lows.
Crude oil will require a retracement back to at least $97.50 to reverse the current bearish technical outlook, with short-term consolidation inside the forecast price range likely as the trend direction clarifies.
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