WTI Crude – False Breakout Not a Bullish Signal

Yesterday I suggested that the downward momentum in WTI appeared to be waning despite breaking through the ascending trend line – 24 August lows – and we could therefore see a false breakout (WTI Crude – Bearish Case Grows on Inventory Build).

WTI Daily

While this could be seen as a bullish signal, I’m not convinced at this stage. As I highlighted yesterday, I would like to see a good reversal set up before possibly changing my view and while yesterday’s completed candle is quite bullish, alone it is not entirely convincing.

Moreover, as I suggested may happen, we have seen another move by the bears back towards the trend line so there is still clearly a desire to see this trend line broken.

If the trend line is broken again, the bulls may be less willing to protect the position given that there is still clearly so much appetite for a move lower.

WTI 4hr

It’s worth noting as well that what we’re actually seeing right now is consolidation which could ultimately lead to the formation of an ascending wedge, or something similar. Given the move that preceded this, that would be bearish and the break of it could start the next leg lower.

Under these circumstances, the next key level for me will be $42.70-43.20 which was a strong level of support throughout September.

Obviously, nothing is ever guaranteed and I continue to look for signs that the bulls are regaining control but for now, I think the bearish case is still much stronger.

Content 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 Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.

Craig Erlam

Craig Erlam

Former Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary.

His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News.

Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.