Technical support at or around $38 is being toyed with by market players on WTI Crude as I write this blog. As you can see on the daily chart, we have not yet seen an indication of downside momentum abating. Stochastics, which is the fastest moving momentum indicator, is still heading down. RSI too. MACD is the one potentially positive beacon light on this chart – given its bullish divergence. That’s offset, however, by horrid moneyflow. Money is leaving the room, with little sign of early buyers stepping in.
If oil doesn’t stay in or around the $38 area, there is quite a bit of support coming in around $35. The long termed chart shows the 2009 lows at around $35 coincided with a level of technical resistance that had kept WTI capped from 2000 – 2004.
My thoughts are that we may just see $35. But that’s not to be known until evidence of a breakdown at $38 occurs. The brief break to $37-ish this week didn’t last. This is why I always follow a 3-bar rule—wait for a break, and then look for follow-up downside with at least 3 days of action. If a break lasts, we have greater confidence that the next support target of $35 is going to be hit. The same goes for buying. Wait for support to prove itself with at least 3 days of upside before buying. That’s a minimum, by the way. I often give it even more time to prove itself before making a commitment.
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