Technical Analysis

Crude Oil (CL) reverses lower after trendline rejection

Introduction

In our January 24, 2025 analysis, we highlighted crude oil’s rally into resistance at the 200-day SMA (74.54) and the descending trendline. We noted that failure to break above these levels would likely result in a pullback, with support levels around 71.97 (50-day SMA) and the broader $67.00 – $68.50 support zone coming into play.

Since then, price action has played out bearishly, with crude failing at 75.30 resistance and now dropping 2.21% to $71.54, testing the 50-day SMA as expected. The short-term outlook remains bearish, with the next test being whether bulls can defend support or if further downside is ahead.


crude oil futures technical analysis

Technical analysis overview

Trendline rejection & breakdown below 200-day SMA

  • Crude oil failed to break the descending trendline, reinforcing the long-term downtrend structure.
  • Price also lost the 200-day SMA (74.54) after a brief attempt to reclaim it, confirming a rejection at resistance.
  • The breakdown signals further downside toward support levels.

50-day SMA retest at 71.97

  • Price is now testing the 50-day SMA (71.97), a level that previously was support.
  • If buyers step in, a relief bounce could occur, but failure to hold this level could accelerate selling pressure toward the support at 67.50.

Support and resistance levels

Resistance levels (Upside Targets)

  1. 74.54 (200-day SMA) – The first major resistance; price must reclaim this level for any bullish reversal.
  2. 75.30 (Trendline Resistance) – The key level where price was rejected; breaking above it would indicate a structural shift.
  3. 77.00 – 78.00 – A breakout target if oil regains bullish momentum.

Support levels (Downside Targets)

  1. 71.97 (50-day SMA) – Immediate support; a breakdown could trigger further losses.
  2. 67.00 – 68.50 (Major Support Zone) – A significant area where price previously found strong demand.
  3. 65.00 (Extended Downside Target) – If selling intensifies, this could be the next key level.

Momentum and trend analysis

Moving averages

  • 50-day SMA (71.97) is the short-term support level; a breakdown here could shift momentum further bearish.
  • 200-day SMA (74.54) remains the key long-term resistance level.

Trend and momentum

  • Oil remains in a long-term downtrend until it breaks above the descending trendline.
  • The recent rejection suggests bearish continuation unless buyers defend the current support zone.

Scenarios to watch

Bearish Case (Higher Probability – 65%)

  • If price breaks below 71.97, selling pressure could push oil toward $68.50 – $67.00 support.
  • A confirmed move below 67.00 would shift the outlook to a deeper correction.

Bullish Case (Lower Probability – 35%)

  • If the 50-day SMA holds, crude could attempt a bounce back toward 74.54 resistance.
  • A breakout above 75.30 trendline resistance would confirm a reversal toward 77.00 – 78.00.

Trade setups

Bearish Setup (Higher Probability Trade)

  • Entry: Short on a breakdown below 71.97, targeting 68.50 – 67.00.
  • Stop-Loss: Above 73.00 to minimize risk.

Bullish Setup (Reversal Trade, Lower Probability)

  • Entry: Long if price holds 71.97 and bounces, targeting 74.54 – 75.30.Stop-Loss:
  • Below 71.50 to limit downside.

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