Market update, Trade ideas: WTI Crude Oil at Resistance, What's next?
Crude Oil prices continue to climb and reached the $70 level last week. Fundamental factors such as synchronized global growth and OPEC production cuts have played a large part in the bullish Oil story and most forecasts see the Oil price remaining at elevated levels.
Turning to the technicals, there are some warning signs flashing that a correction may be due.
WTI Crude Oil is currently trading at the top of a rising channel (resistance) around the $70 level. In addition, the area almost precisely corresponds to the 100% projection of the previous upswing on the weekly timeframe, as shown on the chart below. The past major lows from 2010, 2011 and 2012 are also nearby in the $70 - $75 area. The 100-month moving average at $75.25 completes the top of the resistance zone. The RSI indicator at overbought levels and the bearish divergence on the last two upswings also support the case for a correction.
If the above scenario starts to unfold as expected, then the most likely area for Oil to fall toward would be the former resistance around the $55 - $60 area.