Crude oil tanked during early Asian session due to the US debt ceiling scare, shedding more than 1.4% within the first 3 hours of trade this morning. However, price appeared to have stabilized, and is evident via the lack of bearish response even though HSBC/Markit Chinese Manufacturing PMI (final) came in much lower than initial flash estimates, clocking in at 50.2 vs the 51.2 earlier print. This is a tremendous bearish development which drove risk appetite in Asian market lower, with Hang Seng Index and Nikkei 225 both trading lower.
This lack of bearish response suggest that current bearish momentum may have stalled, and a short-term bottom may be in place. This increases the likelihood of 102.0 holding and opens up the possibility of prices pushing back towards the 103.0 support turned resistance. Stochastic readings agree, as readings are highly oversold and are pointing higher currently. Currently the bullish cycle signal is still not yet formed, and prices may need to clear the 102.5 soft resistance in order to have a clearer bullish mandate towards 103.0. It is also likely that Stoch readings will be above 20.0 should that happens, adding bullish conviction.
However, as long as price stays below 103.0, the long-term bearish bias will remain. Currently bearish cycle appears to be in mid flight, with a 3 Black Crow candlestick pattern weighing. This open up bearish target of 98.0 and we could potentially see quick bearish acceleration if the 103.0 break is confirmed. Ironically, current short-term bullish correction may just be the long-term bearish confirmation needed if prices fail the 103.0 test. But should short-term bullish pressure succeeds, we could see long-term bias shift higher, with 108.5 – 110.0 ceiling in sight.
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