WTI Crude Oil teeters: Navigating the slide towards the $85 crucial support

Given the recent bearish signals in WTI Crude Oil, traders should approach the market with caution. The Chinese Central Bank, PBOC, opting to maintain stable prime interest rates signifies a cautious stance, leading to increased risk aversion in the market. This conservative approach aligns with the currently observed bearish sentiment in oil prices, presenting a potentially lucrative environment for those looking to capitalize on downward movements.

Key points

1. Market Sentiment: The market's short-term bias is seemingly bearish due to an overarching atmosphere of risk aversion and China's conservative monetary stance.

2. Technical Patterns: A completed five-wave bullish wave accompanied by an engulfing bearish candle pattern at the peak underscores a potential reversal in price action, leaning towards the downside.

3. Technical Indicators: The daily RSI’s shift downwards from the overbought region and the declining daily MACD are both indicators signaling bearish momentum.

Potential trading strategies

1. Short Positioning: Given the prevailing bearish outlook, traders might consider entering short positions, aiming to profit from potential price declines. However, maintaining a stop-loss above the immediate resistance level of $90.75 would be prudent to mitigate potential losses if the market reverses.

2. Targeting Supports: Traders can aim to take profits at or near the support levels of $87.50, $86.50, and $85.00, depending on their risk tolerance and trading strategy.

3. Monitoring Resistances: The resistances at $90.75 and $96.00 should be keenly observed. A break above these levels may indicate a possible change in the market sentiment, and traders might need to reassess their positions.

Risk management

Given the inherent uncertainty in the market, it is paramount for traders to employ robust risk management strategies.

1. Set Stop-Losses: A clear stop-loss should be placed above the nearest resistance to manage the risks associated with sudden market reversals effectively.

2. Position Sizing: Traders should keep their position sizes within manageable limits, not risking more than a small percentage of their trading capital on a single trade.

3. Stay Informed: Continuously monitoring market developments, especially any changes in macroeconomic indicators and monetary policy shifts from central banks, is crucial for adjusting trading strategies in real-time.

Conclusion

WTI Crude Oil is exhibiting bearish signals in the short term, driven by a conservative approach from China and a prevailing mood of risk aversion in the market. Traders should consider short positioning while keeping an eye on key support and resistance levels, employing diligent risk management, and staying abreast of any significant market-moving news or data releases.