WTI has sold off heavily at the start of the week just as it appeared to be gathering some bullish momentum. It appears, however, that Friday’s late retracement was in fact a sign that the bears are once again regaining control and further losses could lie ahead.
Of course, today’s candle is not yet done and we cannot write off the possibility of a late rally into the close. Assuming we don’t get that though, we could be left with an evening star formation at a previously highlighted resistance with it having failed to close above the 50 fib level – 6 May highs to 24 August lows.
The first real test of how bearish this actually is – barring the completion of the evening star formation – comes around $47.40 – a recent level of support and resistance that would break the recent trend of higher highs and higher lows.
We shouldn’t forget that last week’s strong performance in WTI means this could just be a retracement. With that in mind, further confirmation may be sought and could come from the break below an ascending trend line – 24 August lows – although it should be noted that in the absence of a third touch, the trend line is not yet confirmed.
Despite that, it would complete the reversal of last week’s gains and offer more support for the view that the bulls are being out muscled once again by the bears.
This would bring $42.70-43.20 into consideration, with it having been a key level of support throughout September.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Craig Erlam
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