WTI oil futures (January 2022 delivery) faced the largest monthly decline since the start of the pandemic in November, with the price plunging well below its simple moving averages (SMAs) to meet support around a four-month low of 64.42 last week.
Despite a bearish start to the new month, oil could see its fortunes improving in the coming sessions as technical indicators are flashing oversold conditions. Particularly, with the market closing constantly below the lower Bollinger band during the past couple of days, the RSI forming a bullish double bottom below its 30 oversold level, and the Stochastics fluctuating below their 20 oversold mark, there is an increasing potential for a bullish bounce.
The 78.6% Fibonacci of the 61.27 – 85.39 upleg is currently limiting bullish flows around 66.88. Should it give way, the door would open for the 61.8% Fibonacci of 69.33 and the 200-day SMA slightly above. Then, if buying forces persist, the price could speed up towards the 50% Fibonacci of 73.62.
In the event sellers dominate below 64.42, the spotlight will shift straight to the August low of 61.77.A break below that floor could push some medium-term traders out of the market as well, likely bringing the 2021 March trough of 57.25 next on the radar.
Summarizing, WTI oil futures look bearish but oversold in the short-term picture. A step above the nearby resistance of 66.88 is expected to enhance buying appetite.
