WTI Oil Forecast: Eyes completion of head and shoulders reversal
|WTI Oil hit one-week low of $56.52 yesterday as the macro/fundamentals factors turned in favor of the bears. As of writing, oil is trading largely unchanged on the day at $56.75 levels.
The price chart shows a major bearish reversal pattern is nearing completion.
Daily chart
The above chart shows-
- Bearish divergence followed by the breach of the ascending trendline.
- Failure to retake the rising trend line on Dec. 12.
- Lower highs and lower lows as represented by the descending expanding channel.
- Head and shoulders bearish reversal with neckline support at $56.10.
- The 5-day MA and 10-day MA are sloping downwards in favor of the bears.
- The RSI has dropped below 50.00 (into bearish territory).
View
- WTI is likely to test the neckline support of $56.10 in the next 24-36 hours. A daily close below $56.10 would confirm the bearish head and shoulders breakdown and shall open doors for $53.31 (target as per the measured height method).
- On the way lower, oil may seek the support of the rising trendline (sloping upwards from the Aug. 31 low and Oct. 9 low) at $55.20. Als, the expanding channel floor could offer support around $54.80 levels.
- Bullish scenario - Only a rebound from the neckline support followed by consolidation (allowing for 5-day MA and 10-day MA to bottom out) would abort the bearish view and could yield re-test of the recent high of $58.93.
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