WTI crude oil could be in for a reversal on its downtrend as it forms a double bottom on its 4-hour time frame. Price is just halfway through on the move to test the neckline resistance, though.
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 gain traction than to reverse. The gap between the moving averages is widening to reflect increased selling pressure while the 100 SMA is holding as dynamic resistance.
A break past the neckline could take the commodity higher by roughly the same height as the chart formation, which spans $51 per barrel to around $54.50 per barrel. RSI is on middle ground to signal further consolidation but seems to have inched above the center line to reflect the presence of bullish momentum.
Stochastic is heading further up and has a bit of room to move north before indicating overbought conditions, so price might follow suit.
Crude oil appears to be drawing a lot of support from Middle East tensions even as inventory data revived oversupply concerns. Last week, US Secretary of State Mike Pompeo said Washington will take all actions necessary to guarantee safe navigation in the region, which could mean more attacks on tankers.
If so, this could disrupt output and keep oversupply concerns in check. Note that the OPEC is also said to be mulling an extension of their output deal as the kingdom would like to see above $60 per barrel crude oil in order to draw more investors in.
In the coming week, the FOMC decision could also lead to more volatile crude oil action as hints of easing could boost business sentiment and therefore demand for commodities. However, focus on trade tensions might still keep a lid on gains.