Technical Analysis – WTI futures range bound; buyers pierce above cloud

Anthony Charalambous, XM Investment Research Desk

WTI oil futures penetrated above the 50-period simple moving average (SMA) currently at the cloud’s upper surface around 42.66, following a recent bounce on the 200-period SMA. A consolidated tone has grasped the commodity for the last couple of weeks but a relatively bullish bearing continues to dominate the SMAs.

The short-term oscillators reflect a slight increase in positive momentum. The MACD is marginally below zero but holds above its red trigger line, while the RSI is improving from its neutral 50 mark. Moreover, the stochastics have shifted positive with the %K line completing a bullish overlap, promoting additional gains.

If buying interest persists, initial resistance may develop at the 43.20 tough barrier ahead of the upper boundary of the range at 43.67 (5-month peak). Triumphing above the ceiling of this confining structure, the commodity could thrust higher to challenge the 45.03 resistance, extending back to March of this year.

Otherwise, if sellers manage to reverse the price into the cloud, immediate obstruction to downside moves may arise from the Ichimoku lines and the 100-period SMA residing at the floor of the cloud at 42.32. Steering lower, the 200-period SMA at 41.60 and the foundation of the sideways move, 41.32 – 41.45, may provide significant support to prevent the decline from unfolding further. Should sellers conquer this floor, they may meet the 40.42 trough before turning their focus towards the 39.88 and 39.65 obstacles. Additional deterioration in the commodity could rest the price at the crucial 38.74 trough.

Summarizing, the short-term picture sustains a neutral-to-bullish bias above the 200-period SMA and the 41.32 level. A break of the 41.32 or 43.67 borders may reveal the next clear direction.