WTI crude likely to head lower into next week

Jason Sen

WTI crude oil has had a fantastic run higher (if you are a bull!) for two years. The strong recovery from $26.05 initially topped at $55.24 at the beginning of 2017 and sold off to $42.05. A powerful rally followed, taking prices to a high of $66.66 in just seven months, a gain of 58%. The total gain over the two-year recovery was 155%.

Click to expand image

The weekly chart above shows how the recovery halted just below the 50% recovery area of $69.15. However, we have to go to the monthly chart below to find a clearer reason for the potential end of the recovery. See how the red 200-month moving average at $65.00/$65.30 worked almost perfectly as resistance. At this point I advised exiting long positions. Consequently we did not manage a monthly close above $65.30.

Click to expand image

A very sharp drop followed, which we can see more clearly on the daily chart below. Prices fell from $66.66 to bottom at $58.07, just above the blue 100-day moving average at $57.50. A good recovery took us to a selling opportunity at the upward-sloping four-month trendline. This is doing an excellent job as resistance now, as one would expect.

Click to expand image

Looking at the shorter-term four-hour chart below, we see another reason why the recovery came to a halt. The red 200-period moving average worked as resistance, just below the 61.8% Fibonacci resistance at $63.38. There must be some bulls caught in a trap who used this as their opportunity to escape. A great opportunity, too, for bears to regain control.

Click to expand image

So we see a strong indication that the price will head lower from here, signalling a short-term bear trend starting to build now. We have to assume this is only a correction to the two-year bull trend at this stage.

We are likely to head towards the first support at $61.35/60.85. Failure here obviously keeps bears in control, initially targeting $60.10. Below $59.70 would keep the pressure on for a test of the February low and 100-day moving average at $58.20/58.07. The reaction here will help us decide if this is still a correction, or a more serious bear trend is developing.

A break below the 38.2% Fibonacci at $57.26 would signal a move towards the December low and 200-week moving average at $55.82/55.60.

Jason Sen

Technical Analyst & Trader

For more information, trading education and offers visit InterTrader

The content of this article is the personal opinion of the author and not InterTrader. You should under no circumstances consider the information and comments provided as an offer or solicitation to invest. This is not investment advice. The information provided is believed to be accurate at the date the information is produced.

Spread betting and CFD trading carry a high level of risk to your capital and can result in losses that exceed your initial deposit. They may not be suitable for everyone, so please ensure that you fully understand the risks involved.

InterTrader is a trading name of InterTrader Limited which is owned and controlled by GVC Holdings PLC. InterTrader Limited is authorised and regulated by the Gibraltar Financial Services Commission and registered with the Financial Conduct Authority in the UK, ref 597312. Registered address: Suite 6, Atlantic Suites, Europort Avenue, Gibraltar.

Losses can exceed deposits