WTI Crude – Will the September Floor Hold Again?

WTI has been in a downward spiral over the last two and a half weeks and is now approaching a key level of support which should give us some important insight into market sentiment at these lower levels.

Throughout September, $42.70-43.20 was a major level of support for WTI as it established a new trading range and it will be interesting to see whether this remains the case.

WTI Daily

Given how many times WTI rallied off this level previously, a break of it now would be very bearish. With that in mind and in the absence of any major support levels between here and 24 August lows, a break may suggest we’re going to see it move back towards $37.25 and potentially beyond.

Of course there are some levels before this that may offer support having done so previously (or provided resistance), such as $41.30 and $39.40, but I think this would only prompt some profit taking and consolidation or a small correction. September’s support strikes me as being far more significant.

As we near the September lows, it may be worth keeping an eye on the MACD and stochastic for divergences which suggest loss of momentum. We may already be seeing signs of this on the MACD but it really isn’t clear at this stage.

WTI 4hr

A failure to break below here may suggest the lower bound of the trading range remains intact. Alternatively, it could just be a case that this is viewed as an opportunity to lock in profit and further declines will follow either a consolidation or correction. Which it is should become clearer over the next week or so.

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.