WTI crude oil is still in correction mode as previously bounced off the top of its ascending channel on the daily chart. Applying the Fib tool on the latest swing high and low on the same time frame shows that the 38.2% level is holding as support for now.
This is close to the 100 SMA dynamic support, which is above the longer-term 200 SMA to confirm that the path of least resistance is to the upside. This means that the uptrend is more likely to resume than to reverse.
However, if a larger pullback is needed, crude oil could draw support from the 61.8% Fibonacci retracement level closer to the channel support and 200 SMA dynamic inflection point around $52 per barrel.
Stochastic is already dipping into oversold territory to indicate that sellers are tired and buyers may be ready to take over. A bullish divergence can also be seen as the oscillator made lower lows while price had higher lows. RSI still has some room to head south so the correction could stay in play for a bit longer.
Baker Hughes reported another increase in oil rigs for the previous week, which increases the chances of seeing more supply gains from the API and EIA data this week. Recall that both have also capped consecutive weeks of declining stockpiles, reviving oversupply concerns.
For now, though, crude oil is finding a bit of support from news that OPEC compliance has reached record levels. The cartel also projects demand to tick higher, which would put more upside pressure on prices.
Then again, keep in mind that a potential review of the output deal is slated for June if the market overheats by then. With that, it makes sense that investors are booking profits off the latest rallies. Risk appetite seems to be returning to the markets as well, although it may be a little early in the week to tell.