Oil Bulls Must Defend $71.10 to Avoid Further Decline: Technical Analysis

Crude oil may drop to a lower trading range if prices decline below $71.10 a barrel, according to technical analysis by Petromatrix GmbH.

West Texas Intermediate crude’s weekly candlestick price chart shows a “triangle” formation between which oil is fluctuating. A drop below the bottom line of this triangle, currently at $71.10 a barrel, may trigger an accelerated fall to lower prices, according to the Zug, Switzerland-based energy consultants.

“Bulls will need to continue defending the bottom line of the triangle or face the risk of an acceleration of the selling,” Olivier Jakob, Petromatrix managing director, said in a report yesterday.

Front-month crude futures on the New York Mercantile Exchange have fluctuated between $70 and $80 a barrel for the past four weeks.

If prices drop below $71.10 “one will need to target the support of $65 a barrel, basically moving from the $80 to $70 range to the $75 to $65 range,” Jakob said.

In contrast, London’s Brent crude futures may move to an “ascending channel” if prices remain above the 200-day moving average, according to Petromatrix.

Front-month Brent futures on the ICE Futures Europe exchange traded above the 200-day average yesterday for the first time since Aug. 17. Futures for October settlement were at about $78.50 a barrel yesterday, compared with its 200-day mean of $77.53, according to exchange data.

To contact the reporter on this story: Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.net

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