Crude Oil may test its uptrend line support at USD110

When crude oil prices broke the immediate uptrend line support at USD132, we expected a price correction & a possible test of the long-term uptrend line support (go here), currently at about USD110 (see the chart below). The much-welcome price correction is now underway and some analysts are beginning to talk about the prices of crude oil at below USD100. I think that is premature at this stage. The USD110 support will not yield without a good fight. I will go with a scenario that crude oil prices would have a decent oversold rally from USD110 & thereafter enter into a price consolidation, similar to that experienced during the period from November 2007 to January 2008 (marked as "A"). In that earlier price consolidation, crude oil prices moved sideway & traded between USD85 and USD100 for 3 months before breaking to the upside.


Chart: WTIC's daily chart for 2 years to August 6th (source: Stockcharts.com)

With crude oil prices closing at USD119 yesterday, the test of the long-term uptrend line support of USD110 is very near. A strong oversold rally could lead to correction in the equity market.