WTI Crude hits strong support after a $6 correction
WTI Crude has been correcting to the downside over the past two weeks. As we become oversold on the daily chart we are testing important support levels today around the $46.00 area. I will let the charts do the talking.
The first chart below is the daily chart for the December expiry contract only. Three important support levels in overbought conditions are clear:
- 38.2% Fibonacci support at $46.15
- At almost exactly the same level we find the 200-day moving average
- Three-month trendline just a little lower at $45.85/80 today (but rising each day of course)
- Three-month trendline support being tested here again at $45.90/80
- Important 23.6% Fibonacci support at $45.82
- The 100-day moving average is at $46.50
Although we are trading below the 100-day moving average as I write, we have not yet closed below here today. Hence I would prefer to see a two-day close below $46.50 to confirm a break below this support.
The four-hour chart
Next, if we drill down to the four-hour chart, we are testing the short-term 61.8% Fibonacci support at $46.13. This is, however, a weak argument and we have already seen one candle close below this area. We therefore need to see a couple of candles close above $46.13 before the end of day to help bulls build a recovery.
The weekly chart
Lastly let’s take a look at the longer-term weekly chart, below. This shows the WTI Crude price testing important 100-week moving average support today.
Furthermore we should note the potential inverse head-and-shoulders pattern on the weekly chart. The red trendline shows the neckline. Although we managed to break above this level in October we are just dipping below again this week.
However, we have not ended the week yet and therefore the bar has not closed. If WTI Crude can finally close above $47.40 on Friday night this would be very helpful to bulls.
Recently markets, especially forex markets, have had a habit of spiking through important levels, only to retract quite quickly. In this low-volume environment it could be bigger stop hunters who are very aware of the fact that they can squeeze out the smaller players, allowing them to profit more quickly as the markets recoil.
Therefore you need a wide stop if you’re trying long positions in WTI Crude at these support levels. I would say at least below $45.40 but preferably below $45.00.
Technical Analyst & Trader
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