WTI crude oil could be in for another leg lower as price broke below the symmetrical triangle support on its 1-hour chart. Price might be in for a drop that’s the same height as the chart formation.
The 100 SMA is below the 200 SMA to indicate that the path of least resistance is to the downside or that the selloff is more likely to gain traction from here. However, the gap between the indicators is narrowing to reflect weaker selling pressure and a potential bullish crossover. If that’s the case, the breakdown could prove to be a fakeout and draw buyers back in.
RSI is on the move up also, suggesting that buyers could take over while sellers take a break. Stochastic is also pointing north so price might follow suit while bullish momentum picks up.
Crude oil is still on very weak footing on account of lower global demand due to trade and travel restrictions resulting from the COVID-19 outbreak. More countries are imposing lock downs, which could mean an extension of these restrictions for a few more weeks or months.
Risk appetite has been supported in the past few days, though, as traders are turning their attention to how the US stimulus package could provide temporary relief to businesses such as airlines. However, without being able to keep the contagion in check, the economic repercussions could continue to worsen.
The IEA has already noted that crude oil demand could be in free fall, especially since the OPEC has yet to come up with a plan to stabilize the markets. Major oil producers can’t quite seem to reach an agreement to curb output in order to support prices, so the price war could keep going.