WTI crude oil recently broke below support at the $56 per barrel level and seems to be completing its retest of the area of interest. If this keeps gains in check, the commodity could fall to the Fibonacci extension levels next.
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 or resistance is more likely to hold than to break. This area of interest is also spanned by the moving averages, with the 200 SMA just above it slightly to serve as the line in the sand for a pullback.
The gap between the moving averages is widening to reflect increased bearish momentum. RSI is on the move up and has a bit of room to climb before indicating overbought conditions, so buyers could stay in control for a bit longer. Stochastic is already indicating overbought conditions and could be due to turn lower to signal that sellers are returning.
The 38.2% level is just above the $52 per barrel psychological mark while the 50% level is around $51 per barrel and the swing low. Stronger selling pressure could take crude oil down to the 61.8% extension at $50.12 per barrel or the 78.6% level at $48.73 per barrel. The full extension is at $47 per barrel.
Crude oil has been able to pull up from its risk-off slide but remains under downside pressure as demand conditions are weak. After all, weaker business sentiment on account of persistent trade tensions would likely keep a lid on energy purchases.
Still, tensions in the Middle East and the OPEC output deal are likely to keep losses limited. Short-term price action this week could hinge on inventory data coming up next.