WTI crude oil fails to hold above $50
A V-shaped recovery in WTI crude this year has seen the price bounce back from a double bottom in January and February. The recovery has almost matched the speed of the sell-off from early September as you can see in the weekly chart below.
You can see how the price topped just below the blue 100-week moving average at $54.00/54.50 last week. The exact high was $51.67 but the important point to note is the shooting star candle that was left last week, as we sold off into the end of the week. Prices closed the week on Friday only 19c above Monday’s open.
We had become severely overbought on the daily chart so the correction was overdue although I saw no signal to tell me it was coming. Already prices have corrected by over $3.50 or 6.75% to a low on Tuesday of $48.02 as I write. We are hovering just above important Fibonacci and trendline support at $47.80/47.50 and this important short-term support will be key to direction this week.
We are oversold in the short term so there’s a good chance bulls can defend this level, at this stage at least, for a bounce towards minor short-term resistance at $49.30/49.60. This will be a challenge and a failure to beat this area risks a slide back to $47.80/47.50 with a far smaller chance this level will hold second time around.
A break below $47.20 could be seen as a short-term sell signal and would target $46.75/46.70 and then support at $45.60/45.40 in the days ahead. At this stage we should have fully unwound the overbought conditions and this will be a major test for this year’s bull trend.
Holding here would mean bulls remain in medium-term control of this market and we can resume the four-month bull trend, initially re-targeting $47.60/47.80, which would then act as resistance of course. However, if prices start closing below $45.00, it could indicate that the longer-term bears are gaining the upper hand as we head into the summer months.
Technical Analyst & Trader
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