Although Global growth
seems to be more and more in peril as the economic data of the biggest
economies in the world keep on deteriorating, Crude Oil is finding strength
from the supply side as OPEC+ tries to maintain prices above the 70$ level and
some are speculating that they want prices somewhere around the $100 level.
Just yesterday, Crude Oil spiked as Saudi Arabia extended its voluntary output
cut through December, although the market has already been trading into such
decision in the past weeks. Overall, it looks like at the moment Crude Oil
might be supported, but higher energy prices now that the global economy is
fragile, might squeeze the demand even more and eventually lead to a selloff as
the economies fall into recession.
WTI Crude Oil Technical
Analysis – Daily Timeframe
WTI Crude Oil Daily
On the daily chart, we can see that Crude Oil broke
out of the key $83 resistance again
and this time the price extended to new highs. This impulse was very strong and
fast making the whole move overstretched. In fact, we can see that the price is
very far from the blue 8 moving average and in
such instances, we can generally see a pullback into the moving average or some
consolidation before the next move.
We can also notice that the latest leg higher diverged with the
MACD which is
usually a sign of weakening momentum often followed by pullbacks or reversals.
From a risk management perspective, the buyers would be better off waiting for
the price to pull back into the trendline and the
previous resistance turned support before
piling in and target the $93 level.
WTI Crude Oil Technical
Analysis – 4 hour Timeframe
WTI Crude Oil 4 hour
On the 4 hour chart, we can see that we have also
the Fibonacci retracement levels
around the support zone and the trendline. This will likely be a strong buying
area, so the sellers will need to have patience and wait for the price to break
below the trendline to invalidate the bullish setup and position for another
big fall into the lows.
WTI Crude Oil Technical
Analysis – 1 hour Timeframe
WTI Crude Oil 1 hour
On the 1 hour chart, we can see that we
have another divergence with the MACD, which should be another confirmation
that a pullback is indeed coming. More aggressive sellers may want to pile in
here with a defined risk above the high to position for a fall into the
trendline.
Upcoming Events
This week is a bit empty on the data front with just the
US ISM Services PMI today and the US Jobless Claims tomorrow being the main
highlights. If we see strong data, the market is unlikely to price an imminent
recession and thus it shouldn’t affect Crude Oil too much. On the other hand,
weak data should bring back recessionary fears and likely trigger some risk
aversion in the markets eventually weighing on Crude Oil.
See also the video below