Crude oil closed yesterday’s session at the lowest level in May. What’s next?
Technical Picture of Crude Oil
In today’s article on crude oil, I decided to share with you my insights on black gold posted in Oil Trading Alert. Have a nice read.
Let’s start today’s analysis with the quote from yesterday’s Oil Trading Alert:
(…) although the mentioned Fibonacci retracement encouraged the bulls to fight, they didn’t manage to protect their ally – the green gap. The commodity finished the day under the lower line of this support, which doesn’t bode well for the buyers and suggests that another attempt to move lower may be just around the corner.
If this is the case, we’ll likely see aa re-test of the previously broken 61.8% Fibonacci retracement or even the May low of $76.70 in the coming day(s).
Looking at the above chart, we see that the situation developed in line with yesterday’s assumptions, and crude oil moved to the south during Wednesday’s session.
What contributed to the bear's success?
Tuesday’s bulls’ failure and the closure of the mentioned gap translated into a lower Wednesday’s opening, which caused a red price gap ($78.21-$78.66) appearance on the chart.
Although the buyers tried to push the price higher after the market’s open, the above-mentioned negative development lured their opponents to the trading floor and accelerated declines in the following hours.
Thanks to the bears’ attack, the commodity not only re-tested the mentioned broken 61.8% Fibonacci retracement, but also closed the day below it, finishing the session at the lowest level in May.
Are oil bulls over?
Yesterday’s closure didn’t look encouraging, however, when we take a closer look at the chart, we see that yesterday’s move materialized on visibly lower volume, which shows that fewer sellers were involved in yesterday's game on the floor.
When we take this fact into account and combine it with the proximity to the key support zone (based on the green gap from the beginning of Feb. 2024, which was strong enough to stop the sellers many times in the past) about which you could read more on Tuesday, it seems that rebound may be just around the corner – especially when we factor in today’s price action in crude oil futures.
Let’s take a look at the charts below.
From this perspective, we see that although crude oil futures moved lower once again earlier today, the combination of the previous lows and the 50% Fibonacci retracement encouraged the bulls to fight.
Thanks to their action, the futures closed (at least at the moment of writing these words), and the gap formed at the start of the day, which is a positive development (it would turn bullish if the future closes today’s session above yesterday’s closure).
Additionally, when we take a closer look at the 4-hour chart, we can notice additional technical factors that could trigger further improvement in the very near future.
What do I mean by that?
Firstly, a successful defense of the previous lows, which translated into a rebound.
Secondly, the current position of the indicators (the CCI and the Stochastic Oscillator generated buy signals, giving the bulls important reasons to act).
Thirdly, a positive divergence between the CCI and the futures.
Taking all the above into account, it seems that the probability of reversal from current increased and will be even more likely and reliable if we see bulls’ willingness to fight also during today's session.
Nevertheless, please keep in mind that as long as yesterday’s red gap remains in the cards, further improvement and attack of the upper border of the short-term red declining trend channel is questionable.
Summing up, on Wednesday oil bears gained another ally, which triggered further deterioration that took the commodity to the lowest daily closure in May. However, the proximity to the next supports in combination with yesterday’s lower volume encouraged oil bulls to push the futures higher earlier today. Such price action suggests that further improvement and attack on yesterday’s gap is quite likely in the coming session(s).
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See you tomorrow.
Anna Radomska