WTI crude oil recently busted through a descending trend line connecting the highs of price since the middle of the month. This suggests that a reversal from the downtrend is in order, but after price has completed a retest of the broken resistance.

The 100 SMA is below the longer-term 200 SMA on this time frame, though, so the path of least resistance is to the downside. In other words, there’s still a strong chance for the downtrend to resume. Then again, the gap between the moving averages is narrowing to signal weaker bearish momentum and a potential bullish crossover.

RSI is still pointing down after recently making it to overbought territory, indicating that selling pressure is returning. Similarly stochastic is heading south so crude oil might follow suit while sellers are in control.

This might be enough to take crude oil down for a correction to the Fib levels marked. In particular, the 61.8% Fib lines up with the broken trend line just above the $66 per barrel level. The 50% Fib lines up with the 100 SMA dynamic inflection point, which adds to its strength as support. The 200 SMA is just close by and might also keep losses at bay in the event of a shallow correction.

If any of the Fib levels hold as support, the commodity could climb its way back to the swing high at $69.59 per barrel or higher. It would also complete the shoulder on the inverse head and shoulder pattern, which is a classic reversal signal.

If that happens, the formation would be roughly $3.00 tall so the resulting rally could be of the same size. Crude oil would need to move past the neckline around $69 to confirm this, though.

Commodities are on solid footing after the US and Mexico struck a bilateral trade deal before Canada joins in the talks. Many expect the next set of negotiations to turn out smoothly, which might buoy crude oil higher from here.