Crude oil prices are dropping and are close to testing the 100-day moving average, which is around $65. If prices fall below this average and stay there, we could see even more declines. On the hourly chart, there’s a support zone between $64.48 and $64.70. If prices go below this zone, the focus will shift to the June low near $64, which would be the next key target.

Importance of the 100-Day Moving Average

Traders should be aware that going below the 100-day moving average could signal further drops. If the price breaks below the $64.48–$64.70 range, it suggests weakness, while dropping below the June low at $64 could confirm a downward trend. These levels may also attract buyers looking to enter the market as prices fall, allowing for managed risks. For potential buyers, this area represents an entry point, with a break below $64 serving as a risk threshold. The $64 to $65 range is crucial for both buyers and sellers. Whether prices hold in this zone or break through will determine the next price move, influenced by whether bulls or bears take control.

Effects of Recent Data and Global Factors

Crude oil is at a key moment, testing the 100-day moving average. This level often separates a market still in an uptrend from one starting a downward trend. The upcoming sessions are vital for identifying the medium-term direction. Recent fundamental data adds to the downward pressure, making a price drop more likely. The U.S. Energy Information Administration recently reported an unexpected increase in inventories by 1.2 million barrels, surprising analysts who anticipated a decline. This suggests demand is weaker than expected, boosting seller confidence. Additionally, reports show that China’s manufacturing activity unexpectedly shrank in May. As the world’s largest oil importer, any weakness in its industrial sector negatively impacts the global outlook. This adds another challenge to any potential price recovery. For derivative traders, this situation suggests preparing for a price drop. Buying put options with a target near the June low becomes a high-probability trade if the price closes firmly below the $64.48 level. This offers a clear-risk strategy to take advantage of bearish momentum. History serves as a warning for optimistic traders. The last time crude oil broke this moving average decisively in September 2023, prices fell by over 20% in the following two months. A similar pattern could recur if support fails. However, for those expecting a price rebound, selling cash-secured puts with a strike price below $64 may be a good strategy. This allows traders to earn income while waiting to possibly buy crude oil at a price that has previously acted as a strong support level. Create your live VT Markets account and start trading now.

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