Oil Plunges to 2-Month Low After Inventory Report

West Texas Intermediate (WTI) fell broadly yesterday, dragging the price of Crude Oil to less than $46.00 a barrel following the release of the US crude oil inventory report. The technical bias has turned bearish because of a Lower Low in the ongoing downside wave.

Technical Analysis

As of this writing, crude oil is being traded near $45.93. A hurdle may be noted around $46.38, a major horizontal resistance area ahead of $48.20, another major horizontal resistance and then $50, the psychological number as demonstrated in the following daily chart.

On the downside, the price of WTI is likely to find a support around $45.32, the intraday low of yesterday ahead of $43.49, the swing low of April 10th and then $40, the psychological number. The technical bias will remain bearish as long as the $50 resistance area is intact.

US Crude Oil Inventory

The Energy Information Administration (EIA) said crude stockpiles fell 2.2 million barrels for the week to July 1, just below a 2.3-million barrel decline forecast by analysts in a Reuters poll. While the EIA reported a seventh weekly decline in crude stocks, the figure it gave was far less than a 6.7 million-barrel draw cited by trade group the American Petroleum Institute in preliminary data issued late Wednesday.

Trade Idea

Considering the overall technical and fundamental outlook, buying crude oil on dips when we get a bullish reversal candle on a four-hour or daily timeframe still appears to be a good strategy in short to medium term.

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Usman Ahmed

Usman Ahmed is an individual forex trader and market analyst. He holds a Masters of Business Administration (MBA) degree. His work includes fundamental and technical reports on various currency pairs, commodity futures and stock markets. His technical analysis features price action strategies.

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