Yesterday I suggested that the downward momentum in WTI appeared to be waning despite breaking through the ascending trend line – 24 August lows – and we could therefore see a false breakout (WTI Crude – Bearish Case Grows on Inventory Build).
While this could be seen as a bullish signal, I’m not convinced at this stage. As I highlighted yesterday, I would like to see a good reversal set up before possibly changing my view and while yesterday’s completed candle is quite bullish, alone it is not entirely convincing.
Moreover, as I suggested may happen, we have seen another move by the bears back towards the trend line so there is still clearly a desire to see this trend line broken.
If the trend line is broken again, the bulls may be less willing to protect the position given that there is still clearly so much appetite for a move lower.
It’s worth noting as well that what we’re actually seeing right now is consolidation which could ultimately lead to the formation of an ascending wedge, or something similar. Given the move that preceded this, that would be bearish and the break of it could start the next leg lower.
Under these circumstances, the next key level for me will be $42.70-43.20 which was a strong level of support throughout September.
Obviously, nothing is ever guaranteed and I continue to look for signs that the bulls are regaining control but for now, I think the bearish case is still much stronger.