WTI crude oil could be in for a reversal from the slide, as price formed an inverted head and shoulders pattern on its 4-hour time frame.

Price has yet to break above the neckline around $75 per barrel to confirm that a reversal is underway. This could lead to a rally that’s at least the same height as the chart formation, which spans around $10.

The 100 SMA is still below the 200 SMA, though, so 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 widening to reflect strengthening selling pressure, and the 100 SMA dynamic inflection point is holding as resistance so far.

RSI appears to be edging lower after coming close to the overbought zone, reflecting how sellers are taking over while buyers are taking a break. Stochastic is pointing up to show that buyers still have some energy left before reaching the overbought area.

Crude oil could take cues from overall market sentiment, especially with the spotlight shifting back to monetary policy this week. Five major central banks have policy decisions lined up, but no major changes are eyed.

Any shift to a more cautious tone due to the emergence of the Omicron variant might be met with risk-off flows, which might then weigh on commodities. On the other hand, maintaining their timelines for tapering or tightening could bring more confidence into the financial markets.

The upcoming inventory reports from the API and EIA would likely impact crude oil direction throughout the week as well, as any large build in supply might signal that demand is once again taking huge hits. Meanwhile, a draw would signal that purchases are still elevated, even with the possibility of travel restrictions or lockdown measures.