Slowing the Decline: WTI Crude Oil prices have been stabilizing in 2015 after a very sharp decline in the second half of 2014. It fell from a high of 107.52 in June to a low of 43.57 in January before consolidating and rebounding to 54.24 as we can see in the daily chart.
Choppy but Still Bearish: Recently in March, price began to descend again and edged out a new low on the year at 42.06, but we saw buyers bring oil prices back above 50 last week. However price failed to push test the 54.24 level before returning below 50.00 and the 50-day SMA. Meanwhile ,the RSI in the daily chart remains below 60, which reflects maintenance of the bearish momentum.
So is the market ready for bearish continuation? Not just yet. Let’s take a look at the 4H chart for the short-term technical development.
Directionless: In the 4H chart, we can see that the market is more or less sideways at the moment with price whipping up and below and back up the cluster of 200-, 100-, and 50-period SMAs. The RSI swung from 20 back up to 70, showing lack of bearish momentum and possibly even initiation of bullish momentum.
Key Support: As noted before, price is retreating below 50 and is now sliding below 48, testing a rising speedline coming up from the 42.06 low on the year. Note that price is also essentially testing the cluster of 200-, 100-, and 50-period SMAs. Clearly, WTI Crude oil is at a critical juncture that will either open up the bearish continuation scenario or keep it in a bullish correction mode.
Bearish Continuation Scenario: break below 47.00 would clear the noted juncture of support, and open up the 42.06 low on the year, especially if the 4H RSI also falls below 40, which shows loss of the prevailing bullish momentum from mid-March.
Bullish Correction Scenario: A hold above 47 and a return back above 49 could indicate further bullish correction in the very short-term. Within the context of the prevailing downtrend in the medium-term, this bullish outlook in the short-term would be limited to the 55.00 handle, allowing for an expanded flat to be seen in the daily chart.
Previous Post by Author: AUD/NZD – Another Broken Flag and Another Record Low