WTI oil futures dropped below the recent consolidation range and prices are now targeting support at the key 50 level. Risk is clearly tilted to the downside in the near term, while technical signals are bearish.
The MACD and RSI are both in bearish territory now. However, the RSI has flattened out, suggesting that downside pressure has eased for now and another consolidation phase is being formed within the 50-handle.
The 20-period moving average has turned back down and is threatening to cross below the 50-period MA. A bearish signal would be given should this crossover happen.
Based on Fibonacci analysis, key retracement levels of the rise from 45.56 to 52.83 are expected to act as support. The 38.2% Fibonacci lies at the key 50 level. The 49.15 level represents the 50% Fibonacci and so falling below this key support would increase the odds of seeing a reversal of the September uptrend and the 47 area would be targeted.
Prices would need to reclaim the 51 handle to indicate the bearish phase is over and shift the focus back to the upside. Breaking above the resistance (previous support) and 50-period MA at 51.30 would target the 52.83 peak and from this point there would be a resumption of the September uptrend with scope to target the previous major high at 53.75.
In the meantime, WTI oil futures are vulnerable to weakness but prices are expected to consolidate within a range just above 50 in the near term. The market holds a neutral to bearish bias.
