West Texas Intermediate crude oil futures topped at a new three-month high of 56.31 during yesterday’s trading session, advancing above the 38.2% Fibonacci retracement level of the downleg from the four-year high of 76.90 to the 18-month low of 42.50.
The technical indicators seem to be overbought, as the RSI is flattening in the positive zone, while the %K line of the stochastic oscillator posted a bearish cross with the %D line in the strong bullish area, signaling possible downside pressures to come in the near term. However, the price successfully surpassed above the Ichimoku cloud and the red Tenkan-sen line is sloping up, endorsing the upside correction.
On the upside, the price could retest the 58.15 resistance level, which if broken, the door could open for the 50.0% Fibonacci mark of 59.67. Should traders continue to buy oil above that region, strengthening the short-term positive bias, resistance could then run towards the 61.8% Fibonacci of 63.76.
A reversal to the downside, could find immediate support at the 20-day simple moving average (SMA) currently at 53.94, while slightly lower the 40-day SMA near 57.72 and the 23.6% Fibonacci of 50.63 could be a critical zone for the bears. If the latter fails to halt bearish movements, the next target could be at the 47.00 round number, taken from the inside swing top on December 26.
Overall, the short-term bias is in bullish correction mode after the rebound on the 18-month low. Further gains above the 61.8% Fibonacci would switch the medium-term neutral outlook to a more positive one.
