WTI oil futures (August delivery) are set to conclude their worst week since March, having plummeted by nearly 10% below trendlines and simple moving averages (SMAs) to hit a three-month low of $95.15/ barrel on Wednesday.
The price is currently trading marginally higher, trying to preserve some strength above May’s low, but the technical indicators are playing down any meaningful upturn. Particularly, the RSI and the Stochastics have yet to enter oversold waters, while the MACD remains negatively charged below its zero and signal lines, all foreseeing more losses ahead. Traders are also waiting to see whether the 20- and 50-day SMAs will defend their recent bearish cross in the short-term and therefore flag a trend deterioration.
Should selling forces resurface below $96.90, all attention will turn to the 200-day SMA and the $92.19 level, which is the base of the four-month-old range area. A decisive step lower from here could immediately stall within the $87.50 – $85.00 constraining zone, while a faster decline could cease somewhere between $80.85 and $79.00.
In the event of an upside reversal, the bulls will need to successfully pierce the 23.6% Fibonacci retracement of the $130.50 – $92.19 downfall at $101.23 to retest the broken trendlines within the $105.70 – $108.85 region. The resistance around the 50% Fibonacci of $111.35 may also guard against further positive corrections to $114.50.
All in all, the sell-off in WTI oil futures is expected to gain more legs in the short term, likely bringing the 200-day SMA and the lower boundary of the neutral area at $92.19 under examination.
