The dramatic drop in oil prices is over. Since falling from a 2014-high of 107.56, WTI Crude has found support at 42.06 in March this year. It has not looked back and is about to recapture the 60 handle.
Here are some observations from the 4H Chart:
1) There is a persistent uptrend with higher highs and lows.
2) The 200-, 100-, and 50-period simple moving averages (SMAs) have started to slope up and are in bullish alignment.
3) The RSI has tagged above 70 and held above 40, which reflects maintenance of the bullish momentum.
4) Price action has also respected the moving averages as support, particularly the 50-period SMA. It has also respected a rising trendline coming up from the 42.06 low.
These technical conditions describe a very persistent bullish trend so if there is a pullback, we should expect support. Where might we see some significant selling? Let’s take a look at the daily chart.
The daily chart shows a WTI Crude making a price bottom. The daily RSI has also cleared above 60, which reflects loss of the prevailing bearish momentum. As far as resistance goes, we can see a couple of falling trendlines, a previous resistance pivot at 69.70, and the 200-day SMA also around 69.70.
We should limit the current bullish outlook to this 69-70 area especially if the RSI climbs above 70, and even more so if there is a bearish divergence between the RSI and price (higher price high corresponding with a lower RSI high).
Let’s say price does retreat from the 69-70 area. Now, because price has stabilized, we should also limit our bearish outlook to 50.
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