WTI crude oil continues to trend lower inside its falling channel as price bounced off the resistance. The Fibonacci extension tool shows the potential levels that sellers are aiming for.

The 38.2% level is near the mid-channel area of interest at $52.30 per barrel then the 50% level is around the $52 per barrel major psychological mark. Stronger selling pressure could take crude oil down to the 61.8% level at $51.73 per barrel or the 76.4% level at $51.38 per barrel. The full extension is at $50.80 per barrel.

The 100 SMA crossed below the 200 SMA to indicate that the path of least resistance is to the downside. Price is still trading slightly above these indicators, and a break below it could allow these to hold as dynamic resistance levels.

However, stochastic appears to be turning higher without reaching the oversold area, suggesting that buyers are eager to return. This could spur another test of the channel top or perhaps a break higher. RSI is halfway down on its move to the oversold area, so there could be more selling pressure left in play.

Crude oil drew a boost from a larger than expected draw in stockpiles as reported by the API, revealing a reduction of 5.272 million barrels for the week ending January 22.

This reflects stronger than expected demand for the commodity, which tends to be affected by business sentiment. The vaccine rollout and optimism for the Biden administration may be boosting optimism that a return to normal conditions would take place sooner than initially anticipated.

Of course the EIA report is bound to generate more volatility, as a draw could mean sustained gains for the commodity this week. Do look out for the FOMC decision and the advance GDP release from the US since these would also have a material impact on overall market sentiment.