June crude oil futures on the New York Mercantile Exchange last week saw a steep price decline of more than $10.00 a barrel. Serious near-term technical damage has been inflicted to suggest that a market top is in place in crude oil. Price action in June crude oil this week has been less volatile and more consolidative in nature. This pause after the recent high volatility has created a potentially bearish pennant pattern on the daily bar chart. A drop in prices below solid chart support at last week’s low of $74.51 would produce more chart damage and would also suggest prices are seeing a downside “breakout” from the bearish pennant pattern on the daily chart. If a bearish downside price breakout from the pennant pattern does occur in nearby crude oil futures, the downside price objective, based upon measuring implications from the pennant pattern, would be the $61.00 area.
A close in June crude oil above technical resistance at this week’s high of $78.51 would begin to provide the bulls with some fresh upside near-term technical momentum. Stay tuned! Jim Wyckoff