Technical Analysis – WTI futures turn up from multi-year low in the near term

Melina Deltas, XM Investment Research Desk

WTI crude oil futures rebounded on the multi-year low of 20.50 on Wednesday, touching the inside swing low from January 2016 at 27.54. The commodity surpassed the 40-period simple moving average (SMA), suggesting a potential bullish correction in the very short-term.

This slightly bullish action is confirmed by the technical indicators. The RSI is flirting with its 50 level and sloping upwards, while the stochastic is edging towards its overbought mark in the 4-hour chart. Moreover, the red Tenkan-sen line of the Ichimoku indicator is sloping north as well approaching its blue Kijun-sen line.

If the price continues the buying interest, immediate resistance would come from the 23.6% Fibonacci retracement level of the downleg from 54.70 to 20.50 at 28.58, which lies near the 20-period SMA. More upside pressure could drive the market towards the 30.80 resistance, inserting into the downward sloping Ichimoku cloud. Above these levels, the 38.2% Fibo of 33.54 and the gap from March 9, 34.00-41.20 could come in place.

On the flip side, additional declines may send oil lower again, finding support at the 40-period SMA currently at 25.74 and the red Tenkan-sen line at 24.90 for now. Clearing these barriers, the multi-year low of 20.50 could be a crucial level for traders, before challenging the psychological mark of 20.00.

Concluding, in the medium-term window, the market has maintained sharp bearish sentiment since January and only a rally above 65.00 could change this outlook.