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Technical Picture of Crude Oil

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From today’s pint of view, we see that the proximity to the barrier of $70 fired up the bulls, pushing them to run together during yesterday’s session.

After a full day of battle, the buyers left behind two pro-bullish candlestick formations: a hammer – candle with a prolonged lower shadow on the daily chart and a bullish engulfing pattern on the 4-hour chart.

Encouraging?

Yes, but… there’s a big "but" - despite all their efforts, they couldn’t fully close the red gap that formed at the start of the day.

What impact did it have on today’s trading?

Crude oil futures started the day with a pro-bullish gap, which was like a signal flare for another charge north.

The setup looked promising: the gap took the price above yesterday’s major resistance (yup, the red gap), opening the way to next Fibonacci levels, the bullish candlestick formations were still intact, and on top of that, 4-hour indicators generated buy signals, giving the bulls even more green lights.

Did crude oil futures explode like Fourth of July fireworks?

Nope.

Instead of extending yesterday’s rebound, the bulls barely managed to test the 50% Fibonacci retracement (marked on the 4-hour chart) before pulling back. The price slipped back below yesterday’s red gap, suggesting that the bears might want to check the bulls’ strength—specifically, their commitment to defending yesterday’s bullish price formations.

What does that mean in practice? 

In my opinion, nothing more, nothing less than this: a re-test of yesterday’s lows should not surprise us today.

Summing up, oil bulls failed to close yesterday’s red gap, which together with their today’s weakness (considering the strong position they had at the start of the day) doesn’t bode well for further improvement and suggests that the re-test of yesterday’s lows (or even the barrier of $70) could be just around the corner.

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