WTI Crude – Correction Seen as Divergence Forms

Earlier this week I highlighted $48.80-49.20 as a key resistance level for WTI (WTI Crude – New Trading Range Being Established?) with it having been so the last two times it traded at this level.

Despite it finding resistance again on Tuesday and Wednesday, it finally broke above here yesterday and has continued to push on today.

WTI Daily

It now appears to have run into resistance again around the next resistance area between $50.25 and $51, which has recently been an interesting area of support and resistance.

As you can see on the hourly chart below, the most recent rallies have come on declining momentum, creating a divergence between price and the stochastic and MACD. This suggests we may see a correction following what has been quite a strong rally to this point.

WTI 1hr

As I suggested previously though, given the hurdle that it overcame this week, I do think this will be a temporary resistance level and more gains could come following a shallow correction. It will be interesting to see now whether that prior resistance level now offers support.

This level coincides with the 50 fib – 6 May highs to 24 August lows – that has previously been resistance, as well as the 38.2 fib – 7 October lows to today’s highs. If this doesn’t hold, the 50 and 61.8 fibs will be of interest, $49.05 and $48.65, respectively.

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Craig Erlam
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.