WTI crude oil is holding on to its gains but the rally seems exhausted, so a correction may be due. Price is also testing the top of its ascending channel anyway, which suggests that profit-taking could be happening.
Applying the Fibonacci retracement tool on the latest swing low and high shows that the 61.8% correction level lines up with the channel support around $64 per barrel. A shallow pullback could find a floor at the 38.2% Fib or $65.50 per barrel.
The 100 SMA is above the longer-term 200 SMA to signal that the path of least resistance is to the upside. In other words, the uptrend is more likely to resume than to reverse. The 100 SMA dynamic support lines up with the 50% Fib at $64.72 per barrel to add to its strength as support. The 200 SMA is just above the channel bottom at $63 per barrel, which would be the line in the sand for the uptrend.
Stochastic is on the move down to show that selling pressure is present, but the oscillator is already closing in on oversold levels to reflect bearish exhaustion. RSI has more room to fall so sellers could stay in control for a bit longer. If bulls are eager to charge, crude oil could simply bust through the top of the channel at $68 per barrel and start a steeper climb.
The commodity has drawn a lot of support from geopolitical tensions in the Middle East, particularly in Syria. Even though the US military attack has prompted risk-off flows in other markets, crude oil has been able to take advantage of speculations of output disruptions in the area.
This week, the attention could shift back to US output with the regular release of the inventory levels from the American Petroleum Institute and Energy Information Administration. Reductions in stockpiles could be another factor propping crude oil higher, along with escalating conflict in Syria.