WTI Oil Futures Rebound Stumbles at 68.00; Upside May Be Over

Technical analysis of Forex market

WTI oil futures are struggling to maintain their positive momentum after meeting resistance in the 68.00 area. The rebound from Monday’s three-month low of 61.77 appears to be stalling with prices testing the 20-day moving average (MA) around 67.55 today.

Looking at the momentum indicators, the stochastics are still rising but the %K line appears to be peaking within the overbought zone, signalling weakening positive bias in the near term. The RSI, however, might be levelling off even before surpassing the 50 neutral level, in another sign that the short-term picture is deteriorating.

If today’s selloff accelerates, the price could seek support from the 23.6% Fibonacci retracement of the November 2020 – July 2021 uptrend at 66.25. A drop below the 23.6% Fibo would open the way for a revisit of this week’s trough of 61.77. Further below lie the 200-day MA at 61.13 and the 38.2% Fibonacci of 60.09. Should this important support zone be violated and the price slips below the key 60 handle, it would not only strengthen the bearish forces in the short term but also switch the current neutral outlook in the medium term to negative.

However, should the price manage to hold above the 20-day MA, further gains might be possible in the coming days, although a number of obstacles stand in the way. First up is the bottom of the Ichimoku Cloud at 68.87, followed by the 50-day MA at 70.49 just above the cloud top. While a climb into the cloud would reinstate the neutral picture in the near term, the price would need to first clear the 50-day MA and then the 33-month high of 76.20 from July to restore the longer-run uptrend.

To sum up, the 20-day MA could determine whether the latest rebound continues or falters. But in the medium term, the price needs to return to the north side of the 50-day MA to avoid a bearish shift.