Just as it looked as though we may see a correction in Brent crude as it ran into support around a key zone, it’s taken another dip lower breaking through the lower bound of the support zone and the 200-day simple moving average in the process.
It’s also broken below the descending channel it had been trading within since early June, which is quite bearish in itself. Should we see a daily close below these levels, it could signal a much broader move to the downside in the coming weeks.
If this happens, the next notable area of support could come around $40.30-40.90. Below here, around $40, is also the 50% retracement of the entire move from this year’s lows to highs.
That said, given the significance of the move below the current support zone – assuming it completes it – I wouldn’t be surprised if this only offered temporary support, with the next major support level coming around $35.50-37.
This is quite a broad range but there a number of possible support levels within it and to me, it’s not important where within this we see a rebound, if of course we are going to see one. This has previously repeatedly been an area of support and resistance and is now also the 61.8% retracement of the above move.
One thing that’s worth noting is that usually, when we see big support or resistance levels being broken – and I consider this to be one – the move after can often be quite substantial. Not only have we not seen that yet, but on the 4-hour chart the MACD and stochastic are showing signs of momentum loss. This makes me suspicious at the moment and may suggest we’re seeing a false breakout. Trading between now and the end of the session should hopefully clear things up a little more.