- Oil market lacks bullish factors, a corrective pullback occurs in the aftermath
- $62 seems to be a key support level for WTI prices (OIL.WTI on xStation5)
- Based on the Elliot wave theory the ongoing rally is still short of yet one leg to the upside
Oil prices were a victim of the latest rout seen in equity markets all around the world. What’s more, the price has reversed from an important technical resistance, however, looking at macroeconomic factors there are no warning signals suggesting a more severe decline ahead. The API released yesterday that stocks dwindled 1 million barrels in the last week despite the consensus pointing at a 2.5 million barrels increase (the DOE is going to release its own numbers later today). There is a reason to stay bullish on oil, but on the other hand the current price is not so encouraging hence upward momentum could slow down. One may assume that the nearest moves could hinge on upcoming reports albeit more long-lived range trading cannot be ruled out. Having said that, the US dollar might be a factor depressing crude price if it regains some of its lost appeal but it should not drive the commodity price in a more durable manner.
A weekly time frame offers a reversal signal as the price respected a resistance zone placed between 100% and 112.8% retracements. A drop below $63.5 means that bears could have already taken control on the market and it may last until more significant reports (bullish ones) emerge.
In turn, taking a look at the chart below one may notice that the price is fulfilling the 4th wave scenario we mentioned in the previous analyses. A potential target might be set at around $62 where more buyers could enter the market. What’s more, this level is also underpinned by a lower boundary of a channel which obviously increases chances to see a rebound. If our view is correct, yet another move to the upside ought to take place. However, if the ongoing downtrend extends beyond $62 some support may be localized at $58.7 and $56.2.
Looking for any resistances one may single out the two last largest corrections: $2.45 and $1.3 respectively.
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