WTI Crude – Bears In Charge But Space For Bullish Surprise Available

WTI declined yesterday due to risk aversion flow. Prices fell further after Iran agreed to rein in its nuclear program starting 20th Jan in exchange for the easing of sanctions. With global oil production expected to 91.5 million barrels a day, the removal of sanctions that prevent banks and insurers from processing Iranian sales will likely increase the production figure even more, depressing crude oil prices all around the world.

Hourly Chart

However, despite the decline seen during late US session, prices have recovered significantly even though Asian markets were equally bearish. Even current bearish European trading session has failed to slow down current bullish recovery. From a technical perspective, prices should have a higher likelihood of rebounding off combine resistance from 92.2 level and descending Channel Top. Stochastic readings agree with Stoch curve currently pointing lower and on the verge of pushing below 80.0 which will give us a bearish cycle signal. Hence, the ability of WTI to resist all these bearish pressure is a testament to the underlying bullish strength. Furthermore, considering that Crude prices have managed to withstand the post NFP decline on Friday quite well, one wonders if bulls would have been able to break Channel Top yesterday if not for the Iran development. Certainly prices is bearish right now but don’t count the bulls out yet; if 92.2 breaks, the possibility of a push towards 93.2 remains.

Weekly Chart

Weekly Chart shares the optimism as well. The relevance of 91.5 support stretches all the way to Jan ’11 on the Weekly Chart. Stochastic readings are also within the Oversold region and the space for further bearish endeavours will be limited, and a straight push towards Channel Bottom from here will be highly unlikely given the sheer distance needed to cover. Hence, a temporary rebound towards 95.0 or even Channel Top is possible before the next bearish leg take over to send us down to Channel Bottom.

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