WTI crude oil has been moving sideways on its 4-hour time frame, finding support around $76.85 per barrel and resistance around $93.70 per barrel. Price is currently testing support and might be due for a bounce again.
Stochastic is already indicating oversold conditions or exhaustion among sellers, and the oscillator looks ready to turn higher to signal a return in bullish pressure. RSI is also pointing up to show that buying pressure could pick up again.
However, the 100 SMA has crossed below the 200 SMA to indicate that the path of least resistance is to the downside or that support is more likely to break than to hold. Also, crude oil is trading below both moving averages, so these could hold as dynamic resistance on rallies.
Resistance levels are located at the middle of the range around $84-86 per barrel, which lines up with the moving averages and a former support zone. A break below the range bottom could set off a drop that’s the same height as the rectangle pattern.
Crude oil has been on weak footing, as risk-off flows have been in play. Apart from the FOMC minutes signaling scope for more interest rate hikes, the lockdowns and rising COVID cases in China are prompting fears of another contractionary cycle.
In turn, this would translate to lower demand for fuel and energy commodities. It does not help that the US has released crude oil from its SPR and the OPEC is mulling increases in production targets. Still, it’s worth noting that the latest API and EIA reports showed larger reductions in stockpiles.
Liquidity is thin during the Thanksgiving holidays, which opens the possibility for more volatile moves on big changes in market sentiment. A return in risk-taking could favor higher-yielding assets like commodities or profit-taking might also spur a bounce.