WTI traded slightly lower today, drifting near a tentative downside resistance line drawn from the high of March 4th. Despite the price trading below that line and below all three of our moving averages, we prefer to adopt a neutral stance for now, as the bears have already failed twice to push it below the psychological mark of 20.00.
Today, the head of Russia’s sovereign wealth fund said that a new OPEC+ deal may be possible if other countries join in. His comments come after the group failed to reach consensus earlier this month, with the existing deal expiring on March 31st. Oil prices have not reacted to the comments, as investors may have remained cautious on the condition of other members joining in. It could also be that market participants remain unconvinced that any deal could offset the damage done to the global demand from the fast spreading of the coronavirus.
Technically, in order to start examining the resumption of the prevailing downtrend, we would like to see a decisive close below 20.00. This may initially pave the way towards the 17.12 area or the 15.61 hurdle, marked by the lows of November 2001 and April 1999 respectively. If the bears are not willing to stop there, further declines may result in a test near the lowest point of 1998, at around 10.65.
Looking at our short-term oscillators, we see that the RSI lies below 50, pointing down, while the MACD runs below both its zero and trigger lines, pointing south as well. Both indicators detect downside speed, but we can also see positive divergence between both of them and the price action, something which supports our choice to stand pat for now.
In order to assess the likelihood of a near-term reversal to the upside, we would like to see a strong recovery above 24.85. This could signal the break above the aforementioned downside line and would also confirm a forthcoming higher high on the 4-hour chart. The bulls may initially aim for the 28.25 barrier, marked by the high of March 20th, the break of which could encourage them to push towards the peak of March 13th, at around 34.00.
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