WTI edged north on Friday, breaking above the 72.60 resistance zone, which acted as the upper bound of the range that had been containing the price action since the 24th of September. That said, the price hit resistance near 73.60 and now it is trading in a consolidative manner slightly below that level. The price structure remains of higher peaks and higher troughs above the uptrend line taken from the low of the 16th of August and thus, we would consider the near-term outlook to still be positive.
If the bulls are strong enough to overcome the 73.60 hurdle soon, then we may see them aiming for the psychological zone of 75.00. Another break above 75.00 could set the stage for more bullish extensions, perhaps towards the 76.55 area, marked by the peak of the 25th of November 2014.
Taking a look at our short-term momentum studies though, we see that the RSI turned down after finding resistance near its 70 line, while the MACD, although above both its zero and trigger lines, shows signs of topping as well. What’s more, there is negative divergence between the RSI and the price action. These indicators suggest slowing upside momentum and make us cautious of a possible setback before the bulls decide to take charge again.
A clear dip back below 72.60 could confirm the case and perhaps open the way for the 71.30 zone. Even if the retreat does not stop there, it could end up near the aforementioned short-term uptrend line from which buyers may be tempted to jump back into the action and push the price towards the resistance hurdles mentioned above.
We would like to see a clear close below the round number of 70.00 before we start examining whether the bulls have abandoned the battlefield, at least in the short run. Such a dip may encourage the bears to push the black liquid towards the 68.20 support, the break of which could open the way for our next obstacle of 67.20, or the long-term uptrend line drawn from the low of the 21st of June 2017.
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