WTI crude extends rally for eighth day to reach critical level

Crude oil has staged a vicious kick-back rally since the turn of the year, now on its eighth consecutive day. But now WTI has reached a critical technical area around $52.50-52.80 and what it does here could determine the direction of prices over the next several days. This area was the point of origin of the last breakdown in mid-December. Given the extent of the rally so far and the not-so-favourable fundamental outlook (with both demand growth likely to fall and non-OPEC supply set to rise in 2019), I wouldn’t be surprised if prices were to at least pause for breath but potentially even turnaround from here. While the potential is there for a drop, we must see a reversal daily candlestick pattern first here before turning bearish again. However, if the bullish momentum continues then we would only turn bullish technically if WTI goes on to take out its previous swing high at $54.55, for a potential break above that level would create a higher high. Meanwhile, there are several key support levels that needs to be monitored if prices do turn lower from here. The first line of defence for the bulls is at $51.00, a level which ‘should’ have turned into resistance yesterday but didn’t. I say that because this was the last support pre-break back in December. So, it may now resume its role as support. Below this, the psychologically-important $50 handle is also a big level to watch. However, if the latter gives way then WTI’s next big reference point is all the way down at $47.50, the point of origin of the latest rally. So, there’s the potential for a sizeable pullback, should the bulls lose control here.

Source: eSignal and FOREX.com. Please note, this product is not available to US clients

Related tags: Crude Oil Crude Oil

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