WTI crude oil futures produced the multi-year low of 20.50 on Wednesday, pivoting up to touch the inside swing low from January 2016 at 27.54. The commodity surpassed the 20-period simple moving average (SMA), suggesting a potential bullish correction in the very short-term.
This slightly bullish action is confirmed by the technical indicators. The RSI is flirting with its 50 level and sloping upwards, while the stochastic is edging towards its overbought mark in the 4-hour chart. Moreover, the red Tenkan-sen line of the Ichimoku indicator is sloping north as well approaching its blue Kijun-sen line.
If buying interest continues, immediate resistance could come from the 23.6% Fibonacci retracement level of the downleg from 54.70 to 20.50 at 28.58, which lies near the 40-period SMA. More upside pressure could drive the market towards the 30.80 resistance, inserting into the downward sloping Ichimoku cloud. Above these levels, the 38.2% Fibo of 33.54 and the gap from March 9, 34.00-41.20 could play out next.
On the flip side, additional declines may send oil lower again, finding support at the 20-period SMA currently at 25.74 and the red Tenkan-sen line at 24.90 for now. Clearing these barriers, the multi-year low of 20.50 could be a crucial level for traders, before challenging the psychological mark of 20.00.
Concluding, in the medium-term window, the market has maintained sharp bearish sentiment since January and only a rally above 65.00 could change this outlook.
