The world’s most important commodity is coming off a brutal month.
After stalling out near $85 in early November, West Texas Intermediate (WTI) crude oil collapsed more than 25% on the back of excess supply from the US and OPEC+ combined with a potentially big hit to demand from the Omicron variant.
Despite the big drop, there are some tentative signs that WTI could be forming a potential bottom over the last couple of days:
• Prices formed a large “piercing candle” on Thursday, signaling a big intraday shift from selling to buying pressure
• The 14-day RSI indicator flashed a bullish divergence, showing waning selling pressure at the low
• Previous support from May and August comes in around the $62.00 area
• We’re currently seeing some continuation to the upside today, despite a poor US jobs report and weakness in other risk assets like stocks
While two days of bullish price action will do little to erase a savage month-long selloff, a break back above the 200-day EMA and previous high at $69.50, ideally accompanied by a break higher in the RSI indicator as well, would strengthen the bullish case and open the door for a bigger recovery toward the 100-day EMA near $74.00 next.
However, a break below $62.00 support would erase any near-term positive bias and potentially expose the March lows near $58.00 next.
After stalling out near $85 in early November, West Texas Intermediate (WTI) crude oil collapsed more than 25% on the back of excess supply from the US and OPEC+ combined with a potentially big hit to demand from the Omicron variant.
Despite the big drop, there are some tentative signs that WTI could be forming a potential bottom over the last couple of days:
• Prices formed a large “piercing candle” on Thursday, signaling a big intraday shift from selling to buying pressure
• The 14-day RSI indicator flashed a bullish divergence, showing waning selling pressure at the low
• Previous support from May and August comes in around the $62.00 area
• We’re currently seeing some continuation to the upside today, despite a poor US jobs report and weakness in other risk assets like stocks
While two days of bullish price action will do little to erase a savage month-long selloff, a break back above the 200-day EMA and previous high at $69.50, ideally accompanied by a break higher in the RSI indicator as well, would strengthen the bullish case and open the door for a bigger recovery toward the 100-day EMA near $74.00 next.
However, a break below $62.00 support would erase any near-term positive bias and potentially expose the March lows near $58.00 next.