Is crude oil entering a new downtrend after breaking significant medium-term support levels?
Crude oil plummeted 7.41% on Friday following the escalation of Trump's tariff policies, breaking below key medium-term support levels. Oil has now fallen to its lowest price level since April 2021, with markets increasingly concerned about global economic slowdown.
For oil markets specifically, these developments are bearish:
- Medium-term support levels have been decisively broken.
- Growing recession fears could significantly reduce global oil demand.
- Escalating trade war with China and potential EU retaliation will likely disrupt energy market.
Conclusion
Crude oil's technical picture has deteriorated significantly following Friday's breakdown below critical support levels. Today, the market is rebounding from a new low, yet still declining by 2.1%. It may pause its sell-off at some point.
With prices at their lowest since 2021, we may see some technical bounces from oversold conditions. However, the risk/reward ratio does not currently justify taking any positions.
For now, my short-term outlook is neutral.
Here’s the breakdown:
- Crude oil has broken below crucial support levels amid escalation in the trade war.
- Price is at its lowest level since April 2021
- In my opinion, the short-term outlook is neutral.
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Thank you.
Paul Rejczak,
Stock Trading Strategist