May Crude Oil Sees Potential Head-and-Shoulders Top Reversal

Crude oil futures for May delivery on the New York Mercantile Exchange are seeing some downside price pressure early this week, which has raised the specter of a bearish head-and-shoulders top reversal pattern forming on the daily bar chart. The February high of $104.95 is the left shoulder of the chart pattern, while the March 7 high of $108.25 is the head, and last week’s high of $106.69 is the right shoulder of the chart pattern. It would take a push below the “neckline” of this head-and-shoulders top reversal pattern–located at the March low of $97.02–to confirm it. If confirmed, the downside price objective from this particular pattern would be the $88.00 area. Any near-term price strength in May crude oil futures that pushes prices back above last week’s high of $106.69 would negate the head-and-shoulders top pattern and would provide the bulls with fresh upside near-term technical momentum. Near-term technical support for May crude oil futures is located at Tuesday’s low of $102.70, at $102.00 and then at $101.00. Major psychological support is located at the $100.00 level. On the upside, near-term chart resistance is located at Tuesday’s high of $104.00, at $105.00 and then at Monday’s high of $105.76. Stay tuned!–Jim Wyckoff