WTI Crude Tests $79 Support After Wedge Breakdown

WTI crude oil is testing a support zone between $80.28 and $78.95 after a bearish breakdown from a rising wedge pattern this week, with the 200-day moving average at the lower end marking a critical inflection point, according to technical analysis by Bruce, a CMT charter holder and former hedge fund trading strategist.

The wedge breakdown confirmed a lower swing high at $88.64, which formed near the confluence of the 100-day moving average and the upper boundary of a falling channel. That bearish development opens the door to a test of the prior higher swing low near $74.60 if the current support zone fails, the analysis said.

Within the $80.28 to $78.95 range, the 61.8% Fibonacci retracement near $79.95 and the 50-day moving average at $79.55 add to the technical overlap. An uptrend line that defined dynamic resistance during the short-term advance also intersects the area. A successful defense of this zone would set up a potential higher swing low, Bruce noted.

Two symmetrical triangle patterns are forming in crude oil, reflecting declining volatility and a narrowing price range. The short-term rising trendline converges with the downtrend line of the falling channel around September 15. One of the triangle's boundary lines should break before that date, providing a directional signal. If prices break below the lower boundary, crude oil would morph into a larger triangle pattern with an apex near October 21, with the key support being the rising trendline connected to the July swing low.

For now, the immediate focus is on whether the $80.28 to $78.95 zone holds. A break below $78.95 would shift attention to the $74.60 area, the prior swing low from the recent advance. The triangle breakout around mid-September will likely determine the next leg for crude oil, the analysis added.