Crude oil recently broke below its falling wedge pattern to signal that further losses are in the cards. Price has since pulled up for a retest and if the broken support holds as resistance, price could resume the drop to the next downside targets marked by the Fib extension tool.

The 50% extension lines up with the swing low and could therefore be the first take-profit point for sellers. Stronger selling pressure could take it down to the 1.8% extension at $64 per barrel or the 78.6% extension at $63.31 per barrel. The full extension is located at $62.46 per barrel.

The 100 SMA is below the longer-term 200 SMA to indicate that the path of least resistance is to the downside. In other words, the selloff is more likely to resume than to reverse. The gap between the moving averages is also narrowing to indicate strengthening bearish pressure.

RSI is pointing up, though, so a larger pullback may still take place. Stochastic is also heading up so crude oil could follow suit while buyers remain in control. Once both oscillators hit overbought levels and turn back down, selling pressure could return.

Crude oil drew some support from the prospect of trade talks between the US and China as this would lift some uncertainty off the markets. In turn, it could revive appetite for riskier assets like commodities and also demand for energy among businesses.

However, these are just low-level talks so there’s no strong likelihood of a big decision this week, probably not enough to cancel the next round of tariffs about to be imposed by the two nations on each other. A return in risk aversion would likely drag crude oil back down.

At the same time, any strong gains in supply could also keep a lid on prices. The Baker Hughes oil rig counts held steady in the previous week, though, so output could also do the same.