Red alert: Will crude oil hit $42 per barrel?

Head and shoulder pattern broke down

The head and shoulder pattern broke down on March 10, 2015. WTI’s (West Texas Intermediate) crude oil price broke below $49 per barrel. On Tuesday, prices fell due to concerns about bullish inventory data due on March 11. A strong dollar also pushed crude oil lower.

Red alert: Will crude oil hit $42 per barrel?

Support for crude oil

Bearish sentiments could push crude oil lower. The key support for WTI oil is at $48 per barrel. The support formed by prices touching this level several times in 2015. However, key resistance is seen at $54 per barrel. WTI oil hit this mark multiple times in February 2015.

The head and shoulder pattern breakout suggests that prices could hit the target of $46 per barrel. The fall in prices would be led by the consensus of bullish inventory data. This report is due on March 11, 2015. If the inventory data is more than the estimates, it could fuel sentiments of the oversupply of crude oil. Prices could fall more. The multiple top pattern in the above chart also suggests that if crude oil breaks $48 per barrel, it will hit $42 per barrel. The US dollar will also put pressure on crude oil prices.

The positive side of crude is the consensus of a decrease in supply growth. An improving demand outlook could push oil prices higher. The RSI (relative strength index) is a technical indicator. It’s in the oversold zone. This means that prices will rise. However, the current momentum is bearish for crude oil.

The price of crude oil is important for oil producing companies. It impacts their profitability. Some key oil companies are Whiting Petroleum (WLL), Hess Corporation (HES), and ExxonMobil (XOM). The price also affects oil-focused ETFs like the ProShares Ultrashort Bloomberg Crude Oil (SCO) and the VelocityShares 3X Long Crude ETN (UWTI).

For recent updates, visit Market Realist’s Crude Oil ETFs page.