Increased in supply/technical selling

The price of crude oil is tumbling lower. The current price is at $67.87, that is down -$2.84 on the day and down a whopping -4.09%. Big day down.

The same two stories are helping the run:

  1. There was a big rise in inventories this week
  2. OPEC/Non OPEC talk about production increases

You can add a more negative technical picture as well.

Looking at the 4 hour chart, the price fell to the 100 bar MA on the 4-hour chart yesterday (blue line) and stalled. A trend line connecting recent lows were also near the level.

Today, those levels were broken (with momentum) and the price has trended lower and lower and lower.

The move has taken the price below the $70 level and also below the 200 bar MA as well at $69.19 (that is a risk level now).

The next targets?

The 38.2% of the move up from the February low comes in at $67.19. The swing low from May comes in at $66.85. That area is the next key level for sellers and it should give traders a cause for pause (with stops on a break).

A week ago (and this week too) there was talk of oil going higher (I even heard $100 as a target). Supply glut was over, Iran and Venezuela oil was coming out of the market. Certainly, there was no reason to go down.

Now the story has changed to increases in supply from OPEC, and you get a big rise in inventories that surprises the market. Technicals deteriorate too, and the ship turns around - at least in the short term.

The price action and tools will help chart the course going forward. Watch the 200 bar MA above at $69.19. On the downside, the $66.85-$67.19 area will be eyed for the next bullish or bearish clue.

PS. Taking a broader look at the daily chart, the $67.19 is the 38.2% of the move up just from the 2018 low at $58.07. Looking back to September 2017, the price was as low as $46. A trend line off that low comes in around the $66 level and the 100 day MA comes in at $65.07. The price can move down to those levels and still be more bullish from a longer term perspective.

So there is room to roam on this corrective move.

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