Commodities

Technical Analysis – WTI futures’ correction calms ahead of the 50-day SMA

Posted on May 7, 2020 at 6:47 am GMT

Anthony Charalambous, XM Investment Research Desk

WTI oil futures’ pullback ran out of steam before reaching the 50-day simple moving average (SMA) at the 26.00 handle. This price stall can also be seen in the hovering of the RSI above the 50 level and the smoothing of the incline of the red Tenkan-sen line.

The short-term oscillators provide conflicting opinions. Looking at the RSI, it has run above its neutral mark while the MACD, in the negative zone, is increasing above its red trigger line towards zero, suggesting more advances. However, the negatively charged SMAs and the bearish crossover between the stochastic lines within the overbought section suggest the commodity could weaken before it progresses.

To the downside, initial support could occur at 20.52, that being the 23.6% Fibonacci retracement of the down leg from the eight-and-a-half-month high of 65.61 to the 6.62 bottom. A step lower could encounter some hindrance from the flat blue Kijun-sen line ahead of the 18.24 barrier, coupled with the Tenkan-sen line. Steeper declines may then meet the 10.07 trough of April 28 before revisiting the historic low of 6.62.

If buyers’ confidence resumes, initial resistance could originate at the 26.00 hurdle ahead of the 50-day SMA of 27.08. Next resistance could appear at the 38.2% Fibo of 29.16, where the lower band of the cloud also resides. Pushing through the cloud, the falling trend line could halt additional advances ahead of the 33.11 peak. Winning this struggle could run resistance up to the 50.0% Fibo of 36.11 prior to the 39.00 and 40.00 round numbers.

In conclusion, with the flattened blue Kijun-sen line and the Ichimoku cloud suspended above, the price may consolidate towards the restrictive trend line before a clear direction unfolds. Yet, although still bearish, a break below 20.52 or above 29.16 could reinforce price action in the short-term timeframe.

oil

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