Technical Analysis

WTI Oil Futures Risk Seeing More Downside

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WTI oil futures have been trading around the pivotal 47- level and keeping within a range between 45.40 and 50.40 since July.

Trading during the last few sessions has been very choppy. The recent rally from the 45-area to the September 6 high of 49.39 fizzled out after the market became overbought as was indicated by the RSI rising above 70 on the 4-hour chart. A subsequent drop found strong support at 47 from where prices bounced off.

Near-term risk is tilted to the downside based on bearish signals from technical indicators. The 20-period moving average is pointing down while momentum oscillators RSI and MACD are now in their respective bearish territory.

Should key support at 47 breaks down, this would increase downside pressure for a move towards the August 31 low of 45.56. A further extension lower would see WTI push outside the broader range and begin to shift out of the neutral phase to a more bearish one and turn the focus to the 42-level.

The odds for a push higher from current levels in the near term have diminished based on the reversal of the 20-period SMA and of the momentum oscillators. A rise above yesterday’s high of 48.24 would signal more upside potential with scope to reach the September 6 high of 49.39. From here, the key 50 level comes into view.

Only a move above the August 1 high of 50.40 would push prices out of the 6-week range. Then the short-term trend would shift to bullish. For now, the near-term bias is bearish while the medium-term is neutral.

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