Oil continues to plunge towards $50 with today’s new reaction low so far at $52.07. Let’s notice that recent weakness violated the 38% Fibonacci support level ($54.65) of the entire bull leg from $16.70 to $78.40. The next purely technical targets are $49.20, which represents a lower support line of the July-Jan bearish price channel, while $47.50 represents the next Fibonacci support level (50%) – and supposedly a very strong floor within a long-term bull market environment.
This is not to say that oil prices MUST press to those target. In fact, the recent nosedive from $66 to $52 has generated a significant oversold condition that can produce a sharp recovery rally at any time. Any such relief rally will find heavy resistance initially at $54.50-$56.
Mike Paulenoff is a 26-year veteran of the financial markets and author of MPTrader.com, a real-time diary of his technical chart analysis and trading alerts on all major markets. For more of Mike Paulenoff, sign up for a free 15-Day trial to his MPTrader Diary by clicking here.
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