WTI crude oil could be due for a quick selloff as it tests the top of its ascending channel previously highlighted. To add to that, a double top has formed as price failed in its last two attempts to move past the $68 per barrel area.
Price has yet to break below the neckline around $66.25 per barrel to confirm the potential selloff, which might last by at least the same height as the chart pattern. This could take WTI crude oil down to its mid-channel area of interest at $65.50 per barrel.
The 100 SMA is above the longer-term 200 SMA to confirm that the path of least resistance is to the upside or that the longer-term uptrend is more likely to continue than to reverse. The 200 SMA coincides with the mid-channel area of interest to add to its strength as support.
Stochastic is on the move up to show that buyers still have some energy left. In that case, WTI crude oil could make another push past the top of the channel to start a steeper climb. RSI is treading sideways to signal potential consolidation.
Crude oil previously gained ground on the prospect of supply disruptions on escalating conflict in Syria. However, easing tensions forced the commodity return its recent winnings and put the focus back on fundamentals.
Recall that surprise builds in US stockpiles were reported in the previous week and this momentum could carry on this week. US drillers added rigs for back-to-back weeks already, which suggests gains in supply from both private API stockpiles or EIA data.
Then again, sustained risk-taking could allow the commodity to hold its ground as cooling geopolitical risks have also been positive for crude oil. A brief round of profit-taking could ensue while a larger pullback could take it down to the channel support near $63 per barrel.