WTI oil futures correct sharply higher but some caution still in play

WTI oil futures (December delivery) found immediate support near the 79.83 level following the bearish breakout below the trendline on Wednesday.

Today’s upside reversal helped the RSI bounce on its 50 neutral mark and stay within the bullish area, though the cautious mood may not fade away unless the price returns above the trendline. The weakness in the MACD and the negative slope in the Stochastics are currently flagging that the bears are still in town. The falling red Tenkan-sen line is also reflecting some anxiety among buyers.

If the trendline at 82.60 proves easy to snap, the bulls will push for a close above the crucial resistance zone of 84.38 – 85.45. A victorious win here would bring the 90.00 level next on the radar.

Otherwise, should the floor around 79.83 collapse, with the price closing below the 79.00 mark too, where the blue Kijun-sen line is positioned and the 200-period SMA is flattening in the four-hour chart, the sell-off could stretch towards the 38.2% Fibonacci of 76.39. The 50-day SMA is converging to the same region, increasing the odds for another sharp downfall - likely towards the 50% Fibonacci of 73.63 - should the bears violate that base too.

All in all, despite the latest upswing in WTI oil futures, negative risks continue to linger in the background. A clear extension above the trendline would reduce downside risks.