WTI crude is seeking confirmation of the bullish break above the descending trend line – 31 August highs – that took place on 16 September.
The retest of this coincides with the ascending trend line – 26 August lows – and the 61.8 fib level – 10 September lows to 17 September highs to create a significant level of support. The 55-period simple moving average on the 4-hour chart could also offer support here. It has been pierced but if we avoid a close below, it could be viewed as bullish.
If we see a reversal set up on this support level it would suggest it has received that confirmation and be quite bullish. Yesterday’s highs – $47.40 – would then become an interesting resistance level, followed by 31 August highs – $48.83.
The divergence between price and the stochastic on the hourly chart does suggest that momentum to the downside is being lost. That said, this doesn’t mean it will reverse now. It also isn’t being matched by a similar show of momentum loss on the MACD which makes me less confident.
Alternatively, if the current support is broken, given how significant it is, we could see quite an aggressive move to the downside. The lack of confirmation is quite bearish and could prompt a move back to the previously established support region between $42.70 and $43.15.